Israel has spent a long time trying to draw in foreign banks, to give their domestic ones some competition. However, it is only now that foreign banks are taking an interest in Israel, and it is not to be competition. On the contrary, foreign banks are still not interested in opening new branches in Israel.
So why are they there?
Banks such as Barclays and Santander have moved focus to Israel because of the FinTech that is growing there. FinTech is the unique combination of Finance and Technological sectors that has recently begun to grow in popularity. People are constantly looking for easier ways to manage their money, and FinTech startups realize that this management is most convenient through technological applications. The FinTech sector is a field in which Israel continues to excel. So, instead of opening bank branches, foreign banks are setting up hubs to invest in and provide mentorship to small businesses.
FinTech is a field that has expanded quickly since it was first created. It went from simply making bank transactions faster to encompassing a large range of technological innovations having to do with the finance sector. One such innovation,for example, would be mobile banking. FinTech has provided faster transaction speeds, more convenient banking, and tighter security for banks.
Now, Israel is expanding the technology in FinTech. For example, Citi Bank has set up a hub in Tel Aviv, and is already reaping the technological rewards from mentoring startups there. They recently were able to reveal a new mobile application called Citi Velocity. This application combines a trading platform for institutional investors with up-to-date market research.
There is no doubt that FinTech startups in Israel are doing well at this point. In 2014, six companies were sold for over 600 million dollars. However, Israeli startups have not always had free reign to show the world what they are capable of. Israel was filled with regulations that made being a startup difficult, as well as high costs to develop a product and a lack of investors. FinTech startups revolutionized this by changing who they show the end product to. They do not just focus on banks, but also on enterprises.
Now, bank owners are fighting to get their companies into Israel to mentor FinTech startups. The cost of setting up a hub is well worth the technology that they will get out of it.
For more information on Israel’s burgeoning FinTech startup scene, check out this Reuters article.