With over 600 fintech start-ups in Israel and 208+ in Tel Aviv alone, it’s clear that the Israeli fintech scene is booming. While the country is already recognised globally as a high-tech powerhouse reaching a record-breaking $8.3 billion in capital funding in 2019, what is it that makes Tel Aviv such a hotbed for fintech software start-ups? Let’s find out.
Renowned for its thriving entrepreneurial culture and deep pool of talent, Tel Aviv is an exciting, bustling and eye-opening city with a penchant for disruptive innovation. Indeed, many of the biggest global VCs have offices in Israel and with big techs being present in the city, it’s more than clear that ideas are welcome in this part of the world. Those looking to trial products or speak to tech experts in a bid to drive their fintech concept are therefore in the right place if they head to Tel Aviv.
Great testing ground for global expansion
Israel is a small country on the Eastern shore of the Mediterranean Sea. The entire population is estimated to be just over 8.6 million as of 2020 with 435,855 people living in Tel Aviv. Such few inhabitants in comparison to European countries or the United States, makes Israel a great testing ground for fintech software start-ups looking to roll out products and services. Tel Aviv essentially provides fintechs with a comfortable testing landscape that facilitates growth and improvement, thereby fostering a productive fintech sector.
The Israeli market is particularly suited to start-ups aiming for global expansion. It allows them to make sure their technology works smoothly before launching in the US, for example, an economy that’s 39 larger than Israel’s. A small market also encourages companies to upscale.
Yoni Assia, CEO and Founder of eToro, said: “I think the great advantage of Israeli fintech is that there is a limited local market, which forces the local fintech industry to focus on larger global markets. The payments, trading and Bitcoin systems that emerged in Israel are in general more global than those in other countries.”
Very high mobile engagement among Israelis
There is very high mobile engagement among Israelis which is good news for fintech companies looking to roll out smartphone fintech apps. In 2018, 6.2 million people accessed the internet through their mobile phone. In 2023, this figure is projected to amount to 6.8 million mobile phone internet users. With Tel Aviv being a highly connected landscape with a good standard of living, fintechs have the opportunity to segment mobile users to test products and refine their software offerings accordingly.
Israel is home to the largest investment crowdfunding platform
Another reasons why Israel and Tel Aviv are popular with start-ups is that the country is home to the largest investment crowdfunding platform in the world. While OurCrowd is a global investment marketplace, many of the companies in their portfolio are based in Israel.
Investment opportunities are indeed attractive for start-ups, with all-eyes on Israel as investments increase. A whopping $1.732 billion was invested in Israeli fintechs during 2019. This was more than double that of 2018 when only $880 million flowed into Israeli fintechs. Four of the largest deals in the fintech realm were over $100 million.
The fintech start-up industry in Israel is showing no signs of slowing down and is an exciting environment for software companies.