The Securities Authority published an intriguing report on the fintech industry in Israel. The report, under the title “Analysis from the perspective of the market and the consumer”, details the state of the industry in Israel.
The data of the report shows that there are about 550 fintech companies operating in Israel, employing about 20,000 people in Israel – the number of companies and the number of people employed in them is relatively high in an international comparison.
In 2021, the industry’s contribution to Israel’s GDP amounted to approximately NIS 8.2 billion, which is approximately 0.5% of the total GDP – a high rate compared to leading countries in the adoption of fintech technologies such as the United Kingdom, Australia and Sweden – it can be estimated that the promotion of the activities of these companies in Israel will bring for an even greater contribution to the local product in the years to come.
Since some fintech companies choose not to offer their services in Israel, the potential inherent in their activity is not fully realized for the Israeli consumer.
Chairman of the Securities Authority, Anat Guetta: “The main conclusions that emerge from the findings are the necessity of implementing regulatory reforms to encourage the activity of the fintech industry in Israel. We must continue to remove barriers and allow direct access to the payment systems in order to reduce dependence on banks and allow fintech companies to offer advanced services for the well-being of consumers, including the ultra-orthodox and Arab sectors, who do not fully participate in the traditional economy, relative to their share of the population. Only if we are able to introduce technological players into the market that will make it possible to realize the vision of an open financial world, the financial market will be able to benefit from the adoption of innovation, the growth and improvement of the services provided to the public.”
Among the recommendations published in the report:
Completing the licensing arrangement for non-bank payment service providers; promotion of an adjusted regulation to prevent money laundering and terrorist financing; Reducing fintech companies’ dependence on the banking system;
Determining exemptions and reliefs for companies operating abroad with a foreign license; providing the possibility to give credit during payment operations; and establishing a body subordinate to the Ministry of Finance to examine how the reforms are implemented in Israel.
The Securities Authority, headed by Mrs. Anat Guetta, is publishing a report today that presents the situation regarding the activity and influence of fintech companies from the perspective of consumers and other players in the financial sector, along with recommendations on how to continue to develop the industry for the benefit of the economy.
According to the findings of the report, as of July 2022, there are approximately 550 fintech companies in Israel, employing approximately 20,000 employees, which constitute approximately 0.5% of all employed in the economy. This is a high amount compared internationally, especially in relation to the size of the population in Israel. The amount of Israeli companies operating in the fintech field is high compared internationally, especially in relation to the size of the population. Israel is placed next to other advanced countries such as Switzerland and Hong Kong and is even placed higher than Great Britain.
In terms of the gross added value index, the data detailed in the report indicate that the contribution rate of the fintech industry in Israel to the total gross domestic product for the year 2021 was approximately NIS 8.2 billion, which is approximately 0.5% of the gross domestic product in 2021. This rate is higher than its rate in the countries selected for international comparison (UK, Australia and Sweden). This, in view of the strong characteristics of the Israeli high-tech sector and the fact that high-quality fintech companies employing tens of thousands of Israelis are growing in Israel.
However, most of the fintech companies, even if they operate from Israel, do not sell their services and products to Israeli consumers and therefore their contribution to GDP is summed up in the figures described above. If these companies were operating in Israel, their contribution to the product would be greater, among other things due to their potential contribution to the optimization of the financial system and the well-being of local consumers.
Therefore, the report deals with the questions that arise as a result of these data, especially in view of the analysis of the fintech industry’s contribution to the local economy and the Israeli consumer.
Fintech companies help to improve and streamline the procedures carried out in the financial market, increase competition in this concentrated market, and expand the target audiences that benefit from it. As a result, the companies lower the costs passed on to consumers and improve the speed and quality of the services provided to them. Among other things, they provide technological developments for streamlining processes in the banking system and among financial institutions, improving risk management and preventing fraud in financial institutions, streamlining underwriting and insurance processes, streamlining payment services, improving the use of financial information and making it directly accessible to customers, streamlining the field of investments and trading, using artificial intelligence in a variety of services, and more .
Fintech companies will be able to benefit the Israeli economy in dealing with its unique challenges. For example, the small presence of the ultra-orthodox and Arab sectors who do not fully participate in the traditional economy, in relation to their share of the population. Fintech companies have the capabilities to appeal to diverse target audiences with specific characteristics and increase the accessibility, supply and personal well-being of their users. Increasing financial inclusion as a national goal has the power to contribute to national resilience, consumer welfare and the democratization of money as a social value.
In accordance with the information in the report, the Authority published recommendations regarding the development of its activities in Israel. Among other things, she recommended the completion of the licensing regulation for non-bank payment service providers, the promotion of a regulation adapted to the activities of fintech companies regarding the prevention of money laundering and terrorist financing, the completion of the broker-dealer legislation to create regulatory certainty for the activities of global fintech companies operating in the field of investments in securities. She also recommended reducing fintech companies’ dependence on the banking system and the simplicity and availability of the possibility to participate directly in the payment systems.