Israel has made a place for itself as a major fintech hub in the Middle East, creating several noteworthy technological innovations in recent years. The question that has been thrown about is, why has such as small country made such a big splash in the global community?
The answer covers several aspects of the local entrepreneurial world. For one, companies seem to be unafraid of challenges, and embrace failure as a positive—a speed bump on the road to success. Moreover, despite the ecosystem’s small size, the population is diverse and culturally rich thanks to several waves of immigration that included scientists and engineers from Russia in the 80s and 90s.
Moreover, the local ecosystem is actually beneficial for the Israeli fintech community, because it allows technology providers to test their ideas on a smaller scale before presenting them to the international industry. In 2016, there were over 430 companies in Israel alone, so networking or finding others to collaborate is easy, and can lead to innovation.
Creating a Welcoming Ecosystem
Israeli authorities have also been known for their welcoming attitude towards innovative ideas and technological innovations. For example, the country has readily embraced bitcoin, creating a more open regulatory framework for the cryptocurrency ecosystem.
If comparing between Israel, the United Kingdom, the US, or Europe, it would seem the least attractive. It isn't as well known as California's Silicon Valley or London, but it is still a strong competitor. Not only has the Israeli fintech industry grown in numbers, it has also drawn the eyes of foreign investors. In 2016, Israeli startups overall were successful in raising $3.2 billion. The increase is quite considerable when compared to the $2.2 billion that had been raised the previous year.
Fintech appears to be on the rise, and especially in Israel, because of the possibilities the industry presents. Not only does Israel get an opportunity to show the world what it is capable of doing, but being able to expand on an international level is a factor of its growing success.
Israeli Blockchain Based Technology
Following in the footsteps of startup companies around the world, Israel entrepreneurs have started experimenting with blockchain. Originally designed as the backbone for bitcoin, blockchain is being adapted to different industries, including payment processors, loans, and cryptocurrencies. Blockchain technology is based on a peer-to-peer (P2P) network, which was created to replace the single server business model by which corporates like Google swear.
Why change the existing system? Though most corporates invest in high functioning cybersecurity systems, these are still not safe enough. One industrious hacker can break into a company website, and it is all downhill from there. Ebay, an eCommerce giant, had its website hacked in 2014. About 148 million customers worldwide had their accounts broken into overnight.
Even though no credit cards or social security numbers were stolen, the fact that it was a real possibility is bad enough. Blockchain is still used as the infrastructure for cryptocurrencies, which are untraceable. Consequently, a hacker would have a harder time trying to locate clients’ bank account or other payment methods on an encrypted transaction ledger. On top of blockchain being the safer option, the system spreads the data load across a decentralized network. More often than not, single server firms will store information, and sell or release it when they see fit. With blockchain, on the other hand, the user is the one in control of his or her self-produced data.
Israeli blockchain companies include companies such as Bancor which offers its own alt coin, while Lemonade helps New York residents buy renter or homeowners’ insurance plans.
Israel as a blockchain promoter
Israel not only began adopting blockchain due to its operational interests, but it further advances its growth by putting into use. Its closed ecosystem allows it to test new ideas, thus introducing more local clients to the technology. The success of the blockchain is not only up to the fintech community, but to the Israeli regulatory authorities, as well.
Israel is a greenhouse for technological innovations, a loyal member of the international fintech community. It accepts new inventions with ease, showcasing its ability to remain flexible and adapt to new technologies. While it is smaller than its American and European counterparts, Israel continues moving forward and helping clients worldwide embrace new financial solutions.