Israel Ramps Up Fintech Integrations as Innovations Enter the World Stage

We may have long associated the Startup Nation with cybersecurity, but Israel’s commitment to fintech innovation is also drawing global attention. With news of major IPOs and acquisitions in the pipeline, could Israel soon become a financial technology powerhouse? 

Israel’s fintech sector is estimated to contribute around 11% to its GDP, and this number could continue to rise as the industry continues on its path to maturity. 

In 2024, the Bank of Israel advanced its entry into the regulated payment space by issuing a unique identification code to challenger bank, Revolut. The integration was a core component of the bank’s strategy to unite more global fintech leaders in Israel’s local payment ecosystem. 

The expedited adoption of fintech innovations and their value for Israel’s gross domestic product underlines the role that technology is playing in a nation that’s famed for its startup activity. 

With the global fintech market expected to reach a value of $751.5 billion by 2032, it’s clear that Israel’s pioneering relationship with financial technology can be a major economic growth factor in the years ahead.  

Driving the Digital Wallet Boom

Israel stands at the forefront of the digital wallet boom. Forecasts suggest that digital transactions lept from a total volume of $802 billion in 2023 to $929.8 billion in 2024, and have become the dominant means of making payments online. 

American Express Israel reported a seismic 58% increase in transaction volume with digital wallets domestically between 2023 and 2024, indicating that the Startup Nation’s commitment to embracing fintech innovation is already paying off for its citizens. 

Because digital wallet transactions are faster than wire transfers, their potential to facilitate cross-border payments has been a particular draw for Israeli users. 

According to a report entitled How Digital Wallets Are Transforming Cross-Border Transactions, digital wallets are now preferred for international transactions by 42.1% of users, which makes the method more popular than its closest rivals in money transfer services and bank account transactions combined. 

Innovation in Risk and Security

The incorporation of artificial intelligence in fintech is expected to be a catalyst for more Israeli innovation in the months and years ahead. Along with the arrival of legislation like the EU’s Digital Operational Resilience Act (DORA), a renewed global emphasis on security within the payments landscape is driving fresh focus on the industry. 

This is likely to see demand for AI-related cybersecurity solutions grows, as well as a rise in the use of intelligent solutions in fraud detection. 

Israel has a strong pedigree in fintech security and risk management. Founded in 2021, Kipp is an Israeli firm that has sought to prevent wrongfully declined transactions from credit card issuers with the help of AI. 

The firm created an artificial intelligence model that offers greater accuracy when assessing transaction risks in real time. This helps to improve relationships with merchants while paving the way for more approved transactions as a whole. 

Another example of AI fintech innovation in action is Tel-Aviv firm Riskified. Using artificial intelligence, Riskified empowers e-commerce companies to protect themselves from instances of fraud and chargebacks. 

Using advanced risk analysis tools, data science, and research, firms can make instant decisions about user transactions. 

Israeli Fintech Gets Into Gear

Despite wider challenges in the sector, the Israeli fintech market is in an excellent position to deliver further growth through M&A activity and IPOs. 

With global fintech investments falling in 2023 to a five-year low of $113.7 billion and still experiencing fewer deals in the months that have followed, many innovative firms have become attractive prospects for acquisitions. 

Israeli firm Rapyd grew to a valuation of $8.75 billion in the midst of the global fintech boom period in 2021. However, Bloomberg recently broke the news that the firm was raising $300 million at a valuation of $3.5 billion, some 60% lower than the company’s valuation three years ago. 

But Rapyd has been undeterred by its weaker valuation and reportedly intends to use its funds to acquire a startup. 

Israeli trading platform eToro has also filed for a Wall Street IPO following the cancellation of its 2021 SPAC listing due to regulatory challenges. The move signifies the confidence of Israel’s brightest fintech firms that they can out-innovate wider market downturns. 

In another case of market-beating deals, Israeli fintech Morning was acquired by Italy’s TeamSystem in a $150 million deal in December 2024, proving that the nation’s startups are still attracting global interest even as fintech valuations have taken longer to reclaim their 2021 levels. 

Startups and Scale-ups

Whether the nation’s fintech leaders are becoming the subject of M&A activity or preparing to go public in an IPO, it’s clear that there’s plenty of positive momentum for Israel’s burgeoning fintech landscape. 

By pioneering artificial intelligence solutions and eliminating the barriers to cross-border payments, it’s clear that the Startup Nation will continue to be a driving force for fintech innovation on a global scale over the years to come. 

Whether you’re a startup or are scaling up, Israel remains the place to go for next-generation fintech solutions.