Digital Banks - Israel

Israel

The Digital Banks market market in Israel is expected to witness a significant growth in Net Interest Income, with projections indicating that it will reach US$2.74bn in 2024.
Moreover, there is an anticipated annual growth rate (CAGR 2024-2028) of 2.38%, which will result in a market volume of US$3.01bn by 2028.
When comparing globally, it is noteworthy that in China is anticipated to generate the highest Net Interest Income, with a projected value of US$969,200.0m in 2024.
Israel's digital banking market is flourishing with innovative platforms that offer seamless user experience and advanced security measures.

Key regions: United Kingdom, Japan, China, United States, Brazil

Definition:

Digital Banks refer to the emerging market for purely digital banks that offer financial services via online and mobile platforms. Unlike traditional banks, digital banks also known as neobanks, do not have store-based branches and instead rely on technology to deliver their services. But in contrast to digital-only direct banks, which focus on providing traditional banking services in an online format, the digital banks/neobanks covered in this analysis prioritize cutting-edge features and a modern user experience.
Digital Banks offer a wide range of financial products and services, including savings and checking accounts, credit cards, personal loans, and investment products, among others. They aim to provide a more convenient, accessible, and user-friendly banking experience by leveraging technology such as mobile apps and artificial intelligence. They also provide a digital identification and onboarding process, often via smartphone.
The Digital Banks market is growing rapidly as consumers increasingly demand more convenient, digitally focused financial services. Neobanks/Digital Banks are able to offer these services at a lower cost compared to traditional banks, as they have lower overhead costs and a more efficient operating model.
However, digital banks face challenges in building trust and establishing their reputation in the financial services industry. They must also navigate the complex regulatory landscape and comply with the same rules and standards as traditional banks.
Overall, the Digital Banks market represents a growing and exciting opportunity for financial services providers to deliver innovative and convenient solutions to consumers.

Structure:

The market data comprises Net Interest Income, the value of Deposits, the value of Loans, Credit Card Interest Income as well as the number of ATMs.

Additional information:

The Banking market is highly competitive and characterized by the presence of large global players as well as regional and local banks. Banks are continually seeking ways to improve their offerings and remain competitive by leveraging technology and offering innovative financial products and services. Additionally, changes in regulations and the growing trend toward digitalization are shaping the retail and commercial banking market, creating opportunities for new entrants and forcing existing players to adapt.

Key players in this market are companies such as Bunq, Tomorrow, and Revolut.

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Analyst Opinion

The Digital Banks market in Israel is experiencing significant growth and evolution, driven by various factors shaping the financial landscape in the country.

Customer preferences: Customers in Israel are increasingly gravitating towards digital banking solutions due to their convenience, accessibility, and efficiency. The younger tech-savvy population, in particular, is embracing digital banks for their seamless user experience and innovative features. The shift towards online and mobile banking is also fueled by the growing preference for contactless transactions and the desire for 24/7 access to banking services.

Trends in the market: In Israel, a notable trend in the Digital Banks market is the emergence of niche digital banking players catering to specific customer segments or offering specialized services. These niche digital banks are able to carve out a unique position in the market by focusing on personalized offerings, such as tailored investment portfolios, advanced budgeting tools, or exclusive rewards programs. Moreover, partnerships between traditional banks and fintech companies are on the rise, leading to the development of hybrid digital banking solutions that combine the strengths of both sectors.

Local special circumstances: One of the key factors influencing the Digital Banks market in Israel is the country's vibrant startup ecosystem and culture of innovation. Israeli fintech startups are at the forefront of developing cutting-edge technologies for the financial industry, including artificial intelligence, blockchain, and cybersecurity solutions. This environment of innovation fosters the growth of digital banks in Israel, as these institutions are able to leverage the latest technological advancements to deliver superior services to customers.

Underlying macroeconomic factors: The regulatory environment in Israel is also playing a crucial role in shaping the Digital Banks market. The country has implemented policies to promote competition and innovation in the financial sector, leading to the issuance of digital banking licenses to new players and encouraging established banks to invest in their digital capabilities. Additionally, the ongoing digital transformation across industries in Israel is creating a favorable ecosystem for digital banks to thrive and expand their customer base.

Methodology

Data coverage:

Data encompasses B2B and B2C enterprises. Figures are based on Net Interest Income, Bank Account Penetration rate, the value of Deposits, the number of depositors, the value of Loans, the number of borrowers, Credit Card Interest Income, the number of ATMs as well as the number of Bank Branches.

Modeling approach / Market size:

Market sizes are determined by a combined Top-Down and Bottom-Up approach, based on a specific rationale for each market segment. As a basis for evaluating markets, we use data provided by the IMF, World Bank and the annual reports of the top 1000 Banks by asset size. Next we use relevant key market indicators and data from country-specific associations such as GDP, deposit interest rates, lending interest rates or bank account penetration rates. This data helps us to estimate the market size for each country individually.

Forecasts:

In our forecasts, we apply diverse forecasting techniques. The selection of forecasting techniques is based on the behavior of the particular market. For example, the S-curve function and exponential trend smoothing are well suited to forecast financial services for digital as well as traditional products and services.

Additional Notes:

The market is updated twice per year in case market dynamics change.