Israel’s fintechs target Europe
Nir Netzer, Head of the Israeli Fintech Association, throws light on the fintech scenario in Israel:
Babu Nair: How does the fintech ecosystem in Israel look like? What kind of companies are part of this ecosystem?
Nir Netzer: Israel is a very attractive market for fintechs in a very broad term. We have experts in AI, ML, blockchain, and also professionals from payments, lending, insurtech, capital market and many more. AI-based credit scoring and trading mechanisms are all part of our ecosystem. In a way, Israel is the frontier in both frontend and back-end fintech solutions.
We are familiar with all kinds of fintech being developed globally. Almost 70% of investments in the Israeli market comes from outside. Israel is a big market. Per capita investment makes Israel second in the world. More than $1.7 billion have been invested in the Israel fintech market. More than 900 fintech startups are currently active.
Israel is a big exporter of cybersecurity technologies, anti-fraud, authentication and identity theft solutions for the financial industry. About $500 million were invested in cybersecurity and antifraud-based solutions.
What kind of reimagining is happening in investments in Israeli fintech due to the pandemic?
Investors were keen on investing in more mature companies and more in the existing portfolios. Many acquisitions took place. This was the scenario in most of 2020. During the Q1 of 2021, investments have opened up for newer startups. Investors are now looking for companies set up by young entrepreneurs. Last year, around this time, valuations for startups dropped. There was also the negative impact of covid on them. Now we see the market coming back to precovid trends. The market is booming in all directions.
What are the markets where Israeli fintechs direct their sales?
Eastern and western Europe are the dominant markets for Israeli companies. Israeli fintechs also do a lot of business in the US market. There is a lot of competition. Israeli companies are active in African, Latin American, Asian and Australian markets. The demand for fintech solutions determines the market. So does the number of competitors with similar solutions present in those markets.
Which are the areas of fintech in which Israeli companies and investors are investing?
Israeli c o mpani e s look into technologically sound companies to invest in. Israeli investors like to invest in Israeli companies. They believe in young and upcoming entrepreneurs. There are various factors to it, one being the easy valuation of the company. The second is similar mindsets of the investor and the entrepreneur, which make partnership easy.
Which fintech technologies are going to be the most relevant in the coming years?
A lot of revolution is going to happen in the days to come. Efforts are on to give customized experiences to the customer. In the banking sector, cryptocurrencies, digital payments and digital wallets are going to stay with us for a long time. Blockchain can enable new payment systems and methods. Cryptocurrencies will also be used for payments going forward. In the insurance sector, newer policies might be issued. Some of the ideas are use-based insurance for cars, animal insurance, smart insurance and cyber insurance based on damages. Maybe the dental insurance could be linked with the way toothbrush is used. These types of connected insurances are going to come in the future. In financial services, accountech, a software which can do the accounting, produce reports and do recoils in a faster way. Audit reports could be generated.
How is the synergy between the local and global fintechs in Israel?
The newer companies are given opportunities to work with bigger conglomerates. We are in touch with more than 40 fintech ecosystems around the globe. There is an open channel of communication that ensures that the new technologies coming out of Israel are heard globally. At the same time solutions developed around the world are also discussed in local forums. As an association, we promote the export of fintech solutions and connect different players around the globe. Larger companies are coming forward to set up R&D centers in Israel.