Israel’s Fintech industry has become a leader in financial innovation, thanks to a particular set of skills that include expertise in cross-over technologies like cybersecurity, big data analytics and AI. 

The industry is also powered by an active and diverse entrepreneurial Fintech community working in a dynamic and global perspective.

To understand the dynamics of Israel’s Fintech sector, let’s start by looking at the growth pattern. In 2012 there were only 159 Fintech companies. By 2017, that number had tripled to 475 companies – and by 2019 it had reached 529 companies. What contributed to this rapid expansion?

Six catalysts for growth

Growing competition in financial services – Recent years have seen the market expand in remarkable ways – far beyond traditional financial institutions. Because Israel’s Fintech ecosystem is B2B oriented, it has been quick to shape itself to these new opportunities.

Meeting the needs of the SMEs – Fintech entrepreneurs realized that Small-to-Medium Enterprises (SMEs) were often not fully served by suppliers like banks. So they moved in. Today, 45% of Israeli Fintech companies serve SMEs via the Cloud, through eCommerce channels and in online marketplaces.

Greater customer interaction – Many entrepreneurs have used their expertise in data collection and analysis to deliver greater value and increase the level of customer satisfaction. They have also become mobile-savvy. Around 30% of Israeli Fintech companies offer solutions that are accessed through a mobile app.

Harnessing technology – Israeli Fintech companies were early adopters of cloud computing, API (application programming interface) and AI techniques to develop highly accessible and lower-cost financial solutions.

Putting innovation into finance – In many cases, the core of a solution has come by applying a novel business or financial model. One example was to develop a new method of credit scoring by analyzing a borrower’s social network activity in addition to their cash flow.

Success that breeds further success – A number of global Fintech companies with Israeli roots have inspired a new generation of entrepreneurs. Borderfree was started in 1999 and acquired by Pitney Bowes in 2015. PB’s cofounder later established the global cross-border payments company Payoneer.

How is Israel’s Fintech organized?

Fintech in Israel is a large and diversified technology branch comprising seven sectors*.

The first three make up almost 60% of the sector:

• Trading and Investing (22.8%)
• Payments and Money Transfer (20.8%)
• Enterprise Solutions (16.6%).

The next group adds a further 25%:

• Anti-Fraud, Risk and Compliance (13.4%)
• Insuretech (11.9%).

The last two subsectors are:

• Lending and Financing (8.9%)
• Personal Finance Management (5.9%).