The fintech industry is constantly evolving and improving, and 2023 is no exception. It is predicted that the fintech space will multiply and reach US $174 billion in 2023 and the key trends driving this growth will be AI & Machine Learning; Embedded finance; SaaS; Open Banking; IoT; and Blockchain. As of 2022, approx. 550 fintech startups are operating in Israel which by global standards is an extremely large number of firms given the size of Israel’s population. There are currently 20 fintech companies incorporated in Israel that are valued at over US $ 1 billion.
These fintech companies in Israel are operating in various specialized fields like payments and settlement, in which (17%) of the companies are concentrated. Additional specialized fields include risk management (14%), data analysis (14%), insurance-related operations (12%), commerce (11%), and investments (10%).
Let’s take a brief look at Israel’s contribution to these key global trends driving the Fintech Ecosystem.
- AI & Machine Learning: Israeli startups develop and apply AI technology for a range of purposes, such as business analysis, applications, cybersecurity, and healthcare. More than 40% of Israeli AI companies are involved in data technology and enterprise software. The startup nation ecosystem has embraced the generative AI technology very well with startups like Astria– Ai image generator, GenieLabs-Personalized 3d content, Codium– AI-powered Interactive Code Integrity Tool; BookWrox– Transforming Books into Binge-worthy TV Shows.
2. Embedded Finance: Embedded Finance industry in Israel is expected to grow by 53.4% on an annual basis to reach US$605.2 million in 2023, providing the infrastructure for companies to build, launch and scale credit products, helping companies assess the creditworthiness of their customers for use-cases including credit cards, credit line assignments and buy now, pay later (BNPL) offerings. Some notable startups in this sector are PayZen, Lama AI, and Noble.
3. SaaS: SaaS sector is advancing in the right direction and will hit the $623 billion milestone in 2023 at a compound annual growth rate of 18%, using SaaS provides access to powerful tools with enhanced security protocols for data storage and management that would be difficult or expensive for individual firms to implement themselves. Some notable fintech Saas startups from Israel are Guma – Expense Management SaaS for Banks’ Corporate Clients; Firmbase– Financial Planning and Analysis Platform; Adaptive Shild– SaaS Security Posture Management Platform
4. Open Banking: Open banking is a financial technology that allows customers to securely share their financial information with third parties, offering them more control and flexibility over their finances. Some of the notable Israeli startups operating in the open banking field are ezbob – the company offers end-to-end and modular lending solutions and guides banks and financial institutions through complex digital transformation. Feezback Technologies – develops solutions for open banking, serving large financial enterprises and fintechs alike.
5. Internet of Things (IoT): The implications for fintech are vast as IoT has made banking more secure, efficient, and convenient. Banks are using sensors embedded into their products to monitor customer activities and automate responses. Dynamic Yield’s AI-powered Personalization Anywhere platform delivers individualized experiences at every customer touchpoint: web, apps, email, kiosks, Internet of Things, and call centers. Nation-E develops cyber protection technology for critical infrastructure and the Industrial Internet of Things.
6. Blockchain: Blockchain is one of the most exciting trends in fintech. Blockchain is a digital ledger that records and verifies different types of transactions. In addition to its security benefits, blockchain has potential implications for cost savings due to its distributed nature. dWallet Labs is a cybersecurity company specializing in blockchain technology. Fuse Labs is a people-centric open-source platform that connects everyday payments to the blockchain without compromising the user experience.