Israel: Hi-tech AscentDec. 23, 2014
Israel’s impressive ecosystem of hi-tech start-ups is increasingly taking on financial technology, with bold ambitions and an eye to the larger potential offered by the US, Europe and Asia.
The conditions have bred a tremendous amount of success for Israeli hi-tech companies, across all sectors, globally. However, over the past 18 months there has been a noticeable shift in the outlook of the country’s tech start-ups as they increasingly embrace financial technology, or fintech. The arrival of international banks looking to harness the prowess of Israel’s technologists has helped. So has the greater interest of domestic lenders as they establish dedicated programmes to support the industry and tap into its longer-term growth potential.
In turn, this has generated such momentum that a new generation of start-ups has emerged to take fintech to the next level. From cyber security, to e-trading, to payments, Israel’s fintech revolution is producing world-beating start-ups in nearly every sphere of the industry.
“One of the things that allows high-technology companies to succeed is if there is a fully functioning high-technology ecosystem. If you look at places that only have a highly innovative tech scene but don’t have the full range of support, from government policy to private-sector finance, you see that companies don’t succeed as often. Israel has that ecosystem,” says Yifat Oron, chief executive of LeumiTech, Bank Leumi’s dedicated hi-tech-focused subsidiary.
Launched in May 2013, LeumiTech is part of the bank’s ambitious plans to harness the potential of Israel’s hi-tech industry. With the ultimate aim of extending $2bn in credit to the start-ups and small and medium-sized businesses in the sector, LeumiTech employs tech-industry experts who understand the requirements of lending to small businesses. Moreover, LeumiTech has collaborated with local start-up accelerator, Elevator, to establish a fintech innovation hub to assist the country’s fintech start-ups.
The domestic lenders aren’t alone in their attempts to tap this market. Citi, already the largest foreign player in the Israeli banking market, has established itself as a leading force in the country’s fintech space. In 2011 the bank founded a dedicated fintech innovation lab following a call from the Israeli government for large, foreign institutions to establish research and innovation centres in the country. “The government itself has been very supportive. The main demand from the government was that we had to strive for innovation,” says Lyron Wahrmann, head of Citi’s Innovation Lab TLV.
The innovation lab was followed by the creation of a dedicated fintech accelerator that opened its doors to a first wave of start-ups in November 2013. Citi is now the only institution that runs a fintech-specific accelerator in the country. It is also the bank’s first technology accelerator anywhere in the world.
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