Banco Santander, a Spanish bank, has made its entry into Israel by investing an unrevealed amount of money in an Israeli-based startup, MyCheck. The startup develops tailored mobile payment applications for a chain of restaurants, including The Cheesecake Factory.
Mariano Belinky, managing partner of the venture capital section at Banco Santander, said that their interest to invest in the startup was contributed by their numerous clients in the hospitality industry, to whom they wanted to offer innovative and improved solutions. Belinky expects that Santander InnoVentures will use part of the $100 million, set aside for investments in two years’ time, to invest in one or two companies in Israel.
Israel has been struggling to attract foreign banks for many years without significant success. The country’s developments in finance and technology have now started luring in the foreign banks.
Top banks including Citi, Santander and Barclays have already established centers, started making investments, and are mentoring early-stage companies in the fintech industry. These banks plan to adopt the smartest of technologies, such as that of MyCheck, which is expected to be implemented by Santander in 2016. The application of fintech has expanded across various areas including cheaper and faster money transfer, risk management, mobile banking, data security, alternative currencies, etc. According to Accenture, global investments in the fintech industry has tripled to about $12 billion in 2014.
The innovation culture in Israel is very extensive and exciting to foreign banks. Citi has already made investments worth tens of millions in its tech center based in Tel Aviv. The bank has received a five-year grant of $25 million from the government and is already setting up Israeli technology. The mobile application for “Citi Velocity” was developed by the bank in its Tel Aviv-based lab. The app is among the leading research and trading platforms used by institutional investors, recording daily volumes of more than $3 billion.
According to the Venture Capital Research Center in Israel, about $369 million was raised by fintech startups, an increase from $13 million raised in 2009. In 2014, six (6) companies were sold for $695 million. This year has also recorded a significant increase. For example, the purchase deal of Fundtech by Canada’s D+H was valued at $1.25 billion.
Barclays has developed a program in its lab that aims at encouraging financial institutions to invest in the fintech sector. The bank is also setting up a program to start mentoring a group of 10 Israeli startups at once. In addition, it is also planning to focus on blockchain, compliance solutions, and cyber security.
Previously, the development of Israeli startups was barred by antiquated regulations, high development costs of initial products and unfamiliarity of the needs of financial institutions. Recently, however, the sector has become more appealing, more enticing and certainly more lucrative.