Will Israeli FinTech continue to thrive in the post-coronavirus era?

Several months have passed since COVID-19 was recognized as a global pandemic, and Israeli FinTech continues to raise money at a fast pace, similar to the levels recorded last year: $604 million in the first six months of 2019, and $594 million in the first six months of 2020. The trend of mega rounds (financing rounds of $100 million or more) also continues, with BioCatch raising $145 million, and Pagaya Investments raising $102 million since the beginning of 2020.

Moreover, Israeli FinTech led America’s most successful IPO so far this year, when InsurTech company Lemonade went public in June 2020 for an outstanding valuation of $1.6 billion, which quickly jumped by 140% when its stock surged on the New York Stock Exchange on the first day it traded.

Nevertheless, it is clear that risks and opportunities will not be distributed evenly across FinTech’s subsectors. While some startups reported that investors are delaying investments (mainly early-stage startups) or that they are struggling to secure new customers, others have indicated a brighter picture.

Anti-fraud, risk, and compliance: possible growth

In times of crisis, fraud tends to intensify, and compliance becomes more challenging; the situation is leveraged by hackers to increase attacks. Since mid-February, new coronavirus-related malicious domains have been rapidly emerging, according to Check Point.

As Israel is globally known for its cyber protection capabilities, many Israeli startups in this subsector will likely experience growing sales and attract new investors. In the first half of 2020, this subsector has secured $151 million in equity funding, almost doubling compared to the equivalent period last year; the increase is mainly attributed to BioCatch.

In addition, 96% of the startups in this subsector are offering solutions to large enterprises or financial institutions, which are more likely to continue paying for services during times of crisis, compared with small- to medium-sized enterprises (SMEs) and individuals.

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Meir Valman is the director of research at Start-Up Nation Central.