Investments in Israeli financial technology (“fintech”) companies reached an all-time high in 2019, according to Start-Up Nation Central (SNC).

The $1.8 billion invested in Israel last year puts the country in fifth place in terms of global fintech investments, after China, the US, UK and India.

Moreover, investments in Israeli fintech companies account for 5.1% of all fintech investments worldwide, leading SNC to call Israel a “fintech superpower.”

Israel’s 2019 investment numbers were up 107% over 2018 and 300% over the past five years. This included six “mega-rounds” of more than $100 million. Lemonade raised $300 million and Next Insurance raised $250 million.

In 2018, by contrast, only one Israeli fintech company had such a mega-round.

Foreign investment accounted for 69% of all Israeli fintech funding rounds in 2019 –up from 57% in 2018.

Yair Fonarov of Start-Up Nation Central

Not a passing trend

There are over 500 fintech companies operating in Israel today.

“The growing investment in the fintech industry is not a passing trend,” commented Yair Fonarov, author of the SNC report.

That said, the next year is not expected to be easy. Covid-19 “has turned the tables on everyone,” Fonarov said, and the fintech industry “is not immune to the shock experienced by other technology sectors in Israel.”

Foreign investors “may want to maintain their distance now, while the local ones will focus on protecting their portfolio companies,” Fonarov added.

That means younger companies may have a hard time finding investors. However, those “that survive the current crisis will see more business opportunities, particularly in the fields of digital payments, fraud prevention and security.”

The SNC report segments the Israeli fintech industry into seven categories:

• Trading and investing startups – 130 companies, $95 million in total investment in 2019.
• Payments and money transfers – 119 companies, $314 million.
• Enterprise solutions – 95 companies, $131 million.
• Anti-fraud, risk and compliance – 74 companies, $327 million.
• InsurTech – 62 companies, $582 million in total investment.
• Lending and financing – 53 companies, $319 million.
• Personal financial management –33 companies, $11 million in total investment.

The SNC report pointed to artificial intelligence as one reason fintech has been so successful in Israel. The use of AI in fintech grew by 86% in the last year, with investments soaring to $781 million.

There are some 1,500 AI-based companies in Israel, including 200 in fintech, SNC reported.