A Case Study on Israeli Fintech StartupsJuly 16, 2018
The Israel finance technology sector has seen unprecedented growth in the last few years because of the innovations in various fields of technology and cybersecurity with local enterprises developing payment and security solutions for global multinationals, banks, etc who are lapping up the action faster than the production of the same.
The sector is raising the interest of investor’s, and a study shows that in 2014 15% of the fintech companies raised capital of $ 369 million while in 2015, 43 companies did so in just nine months. This is way beyond the raised capital in 2009 which was a mere $ 13 million. On records, Israel is home to 430 fintech companies and 14 R&D centres of multinational firms. So, what led to this success story?
Accumulation – Global Skill Sets
Global experience skill-sets of the Israelis’ has helped the nation with its entrepreneurs having worked in Europe, New York, and Asia too with which they have exploited the perfect conditions post the global financial crisis of 2008 keeping abreast of robust technological developments and developing excellent equity-crowdfunding platforms and linkages.
Success stories have been scripted in the SMB lending and P2P segments by enterprises like Fundbox, Ezbob, Blender, and BlueVine with MyCheck and Payoneer excelling in the payments segment and the security for platforms segment also seeing the interest and rapid development. The prime concern of security in the financial sector had indeed been the base on which the fintech companies have gained recognition for reliable and robust security-driven solutions.
A case in point is the Incapsula’s solution which was acquired Imperva in 2014 and is the market leader in the firewall space for web apps. Checkpoint encashed on providing cybersecurity using recent advancements in blockchain technology. Fundbox and Exabeam provide for the best risk assessment solutions enabling real-time decisions and assessing credit worth. Thus, the close linking of better payments and security solutions has led to a growing demand in fintech companies where cybersecurity is crucial.
Other segments in Israel’s fintech boom like crowd-funding, fee reduction, payments, lending, wealth management and insurance also are not far behind and use machine learning and Big Data to the hilt coupling it with experience in cybersecurity and a fintech background. Added to this is the fact that even with limited numbers of hi-tech leaders the industry has seen the smooth flow of labor across sectors and the use of best practices from one to the other enterprise firmly placing the Israeli fintech industry in the driver’s seat.
Innovations in other segments are quickly learned from and acted upon as in the case of BillGaurd, Prosper Marketplace and such. Deep data science excellence, computer vision, NLP, and security are core values to the fintech companies, and Imarticus Learning has also quickly adapted to the same. Simply put the range of solutions that can be built range from military applications, banking, good governance and everything in between involving finance and cybersecurity.
Not everything is in order though as Israel is a small country and still use age-old methods. IDF is an important source and the market regulated largely by two banks of Bank Hapoalim, and Bank Leumi doesn’t make it any easier. Fee solution-based companies like FeeX, Waze, and BitGold see an impending disruption in the financial sector with bank deposits declining very fast with the zero-interest rate policy.
Every major bank in the world now has links to startups in Israel to get toe-space in establishments in Israel. Citibank, Barclay’s and even smaller banks have set up accelerators, R&D centres, and innovation labs to drive the demand further. Now the government has also joined the promotion campaign. Though nascent the Israeli fintech sector is headed the right way and is definitely on its way to introduce itself in everyday life products too. Need better taps, insect traps or wash machines. The Israeli fintech is sure to expand into it with a rich in math, physics, multidisciplinary workforce who specialise in machine learning, use of algorithms and handling huge Big Data with ease.