The emerging fintech industry in Israel may be a catalyst for global change. Disruptors

“Even with its vast local talent, it seems Israel still has many hurdles to overcome in order to become a global fintech hub. […] I do not believe that any obstacles can stop Israel from creating disruptive fintech startups worldwide that will be game-changing.

I wrote that back in 2018, when I was determined to answer whether Israel had the potential to become a global fintech hub. This prediction, which I made three years ago, has now become a fact.

2019 saw Israeli fintech startups raise over $1.8 Billion. In 2020 they are expected to have raised $1.48 Billion despite the pandemic. According to IVC Research Center, Meitar Law Offices, Israeli fintech startups have raised over $1.8 billion in just the first quarter 2021.

There are now over 12 fintech unicorns operating in Israel in areas such as banking, payments and insurtech. Some of these have reached desired status in 2021, like Melio Global and Papaya Global which each raised $100 million and $110 million respectively.

Over the years, I have been privileged to invest as both a venture capitalist, and personally in several successful fintech startups in Israel, the U.S. and other emerging markets, including Alloy and Eave and MoneyLion and Migo.

These years have seen major changes in fintech worldwide, including the adoption of advanced AI-based technology, increased regulatory scrutiny, an innovative approach by financial institutions to form partnerships with fintechs, as well as the COVID pandemic which required consumers to transact electronically.

Fintechs were essential to business survival and played a major role in the migration to digital payments.

What is it that makes Israeli-founded fintech companies stand out among their scaled counterparts across the Atlantic? First and foremost, Israeli founders have brought to the table an unique perspective and understanding about where there are gaps in their focus industries. This could be Hippo and Lemonade for property and casualty, Rapyd, Melio and Earnix in business-to-business payment, or Personetics and Personetics in banking data and analysis.

Even more remarkable is the fact that most of these Israeli entrepreneurs did not start in financial services. Instead, they recognized and built their industry knowledge (sometimes by hiring industry professionals or partners during their ideation stage, strengthening their industry knowledge, and then tried to create more customer-oriented solutions than many financial institutions.

With this knowledge in mind it’s becoming more apparent that Israel’s fintech sector has evolved into an established ecosystem. It now includes a mix of local talent that has scaled up to great success, a global network of insurance and banking partners who have recognised the Israeli fintech innovators, and smart, fintech-focused venture capital. This combination will ensure that Israeli fintech entrepreneurs are successful.

Technology is also a significant contributor to fintech. You can’t achieve unicorn status by relying on tech at the back.

The most important difference between Israeli and other fintech ecosystems is their strong technological barriers. This infrastructure was built from scratch, which allows for more customization, compliance, security, and so on. The following is my prediction for where Israeli fintech startups will be market leaders:

Voice-based transactions

Over the past few years, voice technologies have advanced greatly. Where once you thought you were speaking to a machine, financial applications and institutions now offer an automated service that can sound and feel just like employees.

Israel is a growing market leader in voice tech. Companies like Gong.io provide insights to remote sales teams. Bonobo, acquired by Salesforce, provides insights from customer calls and texts. Voca.ai, which was purchased by Snapchat, offers an automated support agent that can replace large-scale call center costs.

Publiated at Thu 26 August 2021, 16:45:04 (+0000).

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