Israel, for the first time in 43 years, will get its first independent bank. This time, it is a digital bank. The First Digital Bank has begun a trial run of operations with bank accounts for its employees, with the goal of opening to the public by the end of 2021. According to the bank, the online bank will have no physical branches and will offer full 24-hour customer service through online chat and a call center to create a customized service experience for each and every customer. The process of opening an account will be completely online, with no human intervention, and will come with an immediate credit-limit approval process.
First Digital Bank will offer all currently existing banking services, including personal accounts, joint accounts, loans, deposits, credit cards, stocks, guarantees, standing orders and foreign currencies. Eyal Gafni, chief operating officer of the bank, said that mortgages will be added to the offering in the future, as Bank of Israel regulations do not allow them to be taken online. The bank, however, will offer a number of new financing options that are currently unavailable in Israel, Gafni added, without offering examples.
The bank, which has received approvals from the Bank of Israel, was founded by Prof. Amnon Shashua, perhaps Israel’s most successful entrepreneur.
Shashua founded autonomous-driving technology company Mobileye, which was sold to Intel in 2017 for more than $15 billion in the largest acquisition in Israeli history. He also founded Orcam, which makes solutions to help blind and visually impaired people and is expected to have an IPO in New York later this year at a company valuation of about $3b.
First Digital Bank is built upon the foundations of advanced artificial-intelligence technologies, the company said. According to Gafni, “Just like Mobileye uses AI to prevent humans from making the mistakes that cause fatal traffic accidents, similar principles will be used for financial management.” When pressed for examples of how this would work, Gafni said he was unable to provide any further details at this time. He also declined to provide any information about what sorts of fees the bank would charge, although he said that customers would benefit from the bank’s low expense structure.
Since First Digital Bank received its regulatory approvals in December 2019, the company has recruited 140 employees and kept its original timeline of developing a complete banking system from scratch, the company said. Shashua invested $60 million of his own capital into the initiative, and the bank is expected to raise additional funds in the near future to expand its operations.
According to First Digital Bank, Israel’s banking sector is dominated by five large banks that control 98% of the market. The banks charge fees for transactions that rank among the highest in the Western world and are the frequent targets of public scorn.
Israel has been seeking for years to add new banks to the market to increase competition, with little progress. “Netflix killed Blockbuster, Spotify disrupted the music industry, and Tesla left Ford and Mitsubishi behind in a trail of dust,” First Digital Bank CEO Gal Bar Dea said. “The technology we built is designed for large markets. We will offer fair and transparent services to ensure that we become our customers’ primary bank.”
“The artificial-intelligence revolution is here and has now reached the banking system as well,” Shashua said. “The banking industry is thirsty for innovation and competition. We developed breakthrough technology to integrate it within the global market and rebuild banking to make it better for the customers.”
Israel in Focus:
Population: 9 million (2019)
GDP: $395 billion (2019)
GDP Per Capita: $43,592 (2019)