Israel has the largest number of startups per capita in the world, with hundreds of new ventures launching every year. Many of these companies are in the fintech sector (a portmanteau of “financial technology”) and are replicating the success of pioneering European and US startups like myPOS, an innovator in payment solutions.
So, what’s driving this innovation? Why has Israel become a startup hub, and what’s the fascination with fintech?
Israel: Where Technology and Finance Meet
The three biggest companies in Israel are all involved in the banking sector and have invested heavily in financial technology over the last few years. They offer a wealth of digital and POS services, and just like the aforementioned myPOS, they have received global praise for their efforts.
There are a few factors influencing this rush of fintech innovation and helping Israel to become a leader in this sector:
An Educated Society
Israelis are born to succeed. Not only is the country home to some of the world’s most prestigious universities, but its mandatory military service also instils some much-needed discipline in its citizens.
After all, you can’t make it in the cutthroat world of business without very strict self-control and a strong work ethic.
Military service also provides the country’s youth with some vital technical skills, ones that they can take with them into a career in science or technology, whether that means working for a startup or launching the next big unicorn.
Israel is considered to be one of the most educated countries in the world. Nearly half of its citizens have completed tertiary education, and this extends across most age groups. It means that investors are never short of options when it comes to investing in bright young minds, and there is a steady supply of committed, intelligent, and hard-working employees for those startups to tap into.
A High Number of Scientists and Engineers
Israel has the highest number of scientists and engineers per capita. Its universities are churning out a high number of trained and dedicated STEM students. Ambition is also a key part of the local culture, so these students are encouraged to do great things and be the best that they can be.
Not only has this helped to produce a high number of startups, but it also means that Israel is a key hub for scientific and technological innovation. Don’t forget, this is the country that gave the world RSA public key encryption, VoIP, Intel processors, and Thunderbolt, as well as 9 Nobel Laureates in the last 2 decades—not bad for a population of just 9.5 million.
The Rise of Payment Solutions
Smart founders go where the money is, and right now, the money is in financial tech. Every year, digital solution companies process more than $11 trillion in transactions, and that number is expected to grow by around 50% over the next 5 years.
Everyone is seeking a slice of the pie, and as the industry is growing at a rapid pace thanks to the integration of AI and improvements in global banking, there’s enough for everyone.
E-commerce is more popular than ever. Great sums of money are being transferred digitally, and the world is steadily switching to digital-only and online payments. All of these things and more have made the digital payment sector one of the most lucrative in the world, and everyone from the companies processing the payments to the ones creating safer solutions can benefit.
Outside Investment
Unsurprisingly, many of the world’s biggest tech companies have invested heavily in Israel and its startups. These companies are seeking to back a winning horse, and they do that to the tune of over several billion dollars a year.
That’s a lot of money flowing into the company’s most innovative startups, and it means they have the financial support they need to realise their goals. They also have support from their own government, which has clearly realised it’s onto something good.
Startups need innovators. They need founders and teams that are prepared to work hard and have the connections, brainpower, and willpower to make their ideas work. They also need a lot of money, especially in the highly competitive fintech sector. But it’s clear that they are getting the funds they need, and the more success that these companies achieve, the more cashflow they bring into the country and the more potential they create for the next generation of startups.
Israel’s promising history with financial technology startups also means there are a lot of angel investors and venture capital funds in the country that are more than happy to back their fellow citizens.
Which Fintech Companies Are Based in Israel?
Tel Aviv is home to a number of global fintech companies that dominate their respective fields, with a user base that extends to all corners of the globe. Some of the biggest household names that currently call the country home include:
eToro
Founded by Yoni Assia, Ronen Assia, and David Ring in 2007, this Tel Aviv-based trading platform is one of the most popular places to trade online. Its USP is that it lets everyday investors follow the trades of more experienced traders. It’s supported on most platforms and covers a wide range of assets, including shares, CFDs, and cryptocurrency.
Payoneer
Although it is currently based in the United States, Payoneer was founded by Yuval Tal, an Israeli-born and raised businessman who sought investment from Israeli angel investors and venture capital funds.
Payoneer is a financial services company in much the same vein as PayPal. It offers a range of solutions to its customers, including digital payment services for businesses and a web wallet that facilitates transactions in over 150 currencies.
Rapyd
Rapyd is a fintech platform that offers a range of payment solutions, including e-commerce, cross-border payments, online trading, online gaming, and payroll solutions. The company began by offering mobile payments before expanding operations in 2016.
Equitybee
Originally based in Tel Aviv, Equitybee helps startup employees exercise stock options. It was founded by Oren Barzilai, Mody Radashkovich, and Oded Golan in 2017. The serial entrepreneurs sought funding from venture capital funds and grew quickly, helping employees form some of the biggest startups in the world, including DoorDash and AirBnB. It is currently based in Palo Alto, California.
Finaro
Launched in 2007, Finaro is a payment service provider and online merchant that is headquartered in Herzliya. It has a reach that extends across Europe, the United States, and China, and in 2003 it was acquired by the American payment processing company, Shift4.
Summary: Israel and Fintech
There’s clearly something in the water in Israel. It’s a small country with huge ambition and its foot firmly in the door of the financial technology sector. Israel has been a leader in this field for a number of years, and as more companies launch to global acclaim and existing operators spread further afield, its influence will only grow.
It has tens of thousands of highly skilled entrepreneurs investing their skills in thousands of promising startups, and with ongoing support from major investors and the Israeli government, it’s fair to assume that Eretz Yisrael will remain a major presence in fintech for years to come.
This article was written in cooperation with myPOS.