Why Does Israel Have a Competitive Advantage in FinTech?

Dorel Blitz is a key player in shifting and shaping the landscape of Israel’s FinTech industry. He possesses over ten years of cutting-edge business technology, banking, and investment experience.

Dorel gained his earlier experience serving as the head of Banking & Finance Research Division at Adkit, one of the country’s leading global markets research companies, where he managed a team of over 25 business analysts and project managers. He then segued into the FinTech industry where he served at Bank Leumi as the bank’s Innovation & FinTech manager. Today he serves as the Head of Fintech department at Israeli office of the global firm KPMG.

Dorel is a member of KPMG’s FinTech Global Growth and Strategic Initiative. He holds degrees from both Bar Ilan University and the University of Haifa.

What are the major challenges faced by the FinTech sector?

One of the biggest challenges FinTech companies faces is finding a way to cooperate with the large financial investment institutions, such as Goldman Sachs. It is nigh impossible to interact directly with the end consumer so to succeed, FinTech companies need to collaborate with the traditional financial organization and find the way to strengthen and streamline their financial processes and avoid becoming a part of the portfolio of the large corporate.

The FinTech paradigm is distinguished by its movement from a volatile disruptive process, to co-creation, collaboration, and then organized integration with a well-defined business model or clear-cut technology. Smoothly transitioning through the above process is one of the key challenges FinTech companies face today.

The world-renowned management consulting firm McKinsey carried out extensive research on this topic demonstrating how FinTech companies have been making a significant leap in their technological transitioning capabilities, by employing cognitive computing and AI technologies to increase company efficiency and improve client transactions.

How would you describe the FinTech environment in Israel and the competitive advantage the country has to offer?

I think that the country has been experiencing impressive growth in the rise of FinTech companies due to the following factors:

  • Israel has many experienced entrepreneurs who are starting up new ventures for the second or even third time.
  • The Israeli government plays a definitive role in attracting new start-ups by providing companies with financial incentives. Local start-ups receive generous governmental support from the Innovation Authority, whose budget has recently increased.
  • The Israeli population has a very deep technological knowledge, and it is not necessarily because they serve in the army, rather, it is due to the methodology of teaching and the entrepreneurial culture that has been fostered here for many years. My nine-year-old son, for example, attends a regular school in Kfar Saba. He and his classmates are now taking part in the Ministry of Education’s code monkey competition. It is become mainstream in Israeli schools today for third graders to learn code writing.
  • Foreign investors and insurance companies view Israel’s relatively small market size as the perfect test pool for product or service viability, before marketing to the rest of the world. Israel contains the perfect combination of investors and financial bodies that contribute to the beta site.

Of all these advantages, what would you consider the most relevant to FinTech, given that most of the points you make are relevant to the high-tech industry in general?

I think that right now, the biggest FinTech advantage is Israel’s entrepreneurial culture. Israel is very accepting of local entrepreneurs that build companies, experience failure and move on. In most foreign countries, failure is not acceptable.

We know well the financial regulators in Israel. We held several roundtables in which we openly discuss the FinTech industry and brainstorm solutions to a variety of issues. The idea is to enable companies to develop and expand locally before they exit the Israeli test pool and begin marketing to the rest of the world.

What are some of the unique technologies and companies emerging from Israel?

One of the fields Israeli FinTech companies are spearheading is trading investment.     I believe the phenomena is due to Citibank’s founding of a Fintech accelerator here that reports to Global Citibank’s Capital Markets Division. In turn, the capital markets gained increased interest in local trading and investment companies this past year, we see a substantial growth of algorithm-based investment portfolio trading companies in the local market.

The country has also experienced a growth in RegTech companies that are introducing their aggregated experience in the collection and processing of data. Regulation tech is the financial world’s third largest expenditure, after customer experience and operational efficiency. It is also a crucial part of the financial investment process whose budget is never cut in financial bodies, rather only increased.

Do you think the current trend of FinTech start-ups cooperating with financial bodies will continue to progress in the long term?

As long as financial companies continue to hold a strong brand, provide access to untapped markets and customers, and offer significantly lower customer acquisition costs than competing Fintech companies, we will continue to see collaboration.

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