Fintech has enabled increased regulatory requirements, which in some ways have caused the financial sector to move backwards. The number of corridors for cross-border payments is down 10% since 2011, while the number of active correspondents is down 20%, according to slides presented by Yaron Hazan, VP Regulatory Affairs of ThetaRay. At the same time, the value of transactions is up 15%, and payment messages are up 40%. These simple statistics demonstrate a trend towards concentration in international financial services. They also hint at an important role of fintech in the new economy: to diversify the sector away from such choke points.
Fintech has enabled increased regulatory requirements, which in some ways have caused the financial sector to move backwards. The number of corridors for cross-border payments is down 10% since 2011, while the number of active correspondents is down 20%, according to slides presented by Yaron Hazan, VP Regulatory Affairs of ThetaRay. At the same time, the value of transactions is up 15%, and payment messages are up 40%. These simple statistics demonstrate a trend towards concentration in international financial services. They also hint at an important role of fintech in the new economy: to diversify the sector away from such choke points.
Each of the Israeli fintech startups highlighted in TABF’s August 12 “Fin & Tech Talk” attacked this problem in some way. The Fin & Tech Talks are a series of seminars highlighting the achievements of a variety of companies in different sub-sectors of fintech, each one featuring a single country. This was the second time Israel has been featured, reflecting its strength in this field.
First, Patrick Tan and David Yang from Personetics highlighted the transformation in financial personalization from just robo-advisory wealth management to “self-driving finance.” With Personetics’ back-end services, banks are able to derive more value from their existing relationships, while customers can tailor their spending and savings habits using their financial data. This platform helps demonstrate the potential of open banking, which is in the process of implementation around the world, to free customer data from their personal bank accounts.
The next presenter in the talk was Tezos, in the blockchain space. Tezos Chief Innovation Officer Alex Davis introduced several of its characteristics. In particular, he compared its on-chain governance system to a representative rather than direct democracy. This system helps Tezos avoid forks, which he recommends to “avoid at all costs.” Most interestingly, Mr. Davis also introduced his own virtual, non-custodial bank based on the same technology, a distributed autonomous organization (DAO) in which all transactions are final. This system disrupts the fundamental banking model.
Next, Seira Wang, Senior Account Executive of Zotapay, introduced the work of her company integrating payments services all over the world. Appropriately, the motto of Zotapay is “one application, one integration.” Through back-end integration, Zotapay can bypass industry giants like Google Pay and Apple Pay, allowing it to be used by ordinary people even in more remote places like Africa.
The final startup presenter was Mr. Hazan of ThetaRay. ThetaRay uses a full-stack engine comprised of unsupervised and supervised learning, as well as rule-based procedures, to detect fraud. He explained the loss of correspondent banking relationships over the years as a problem of trust, to be remedied by effective controls. ThetaRay features low false positive rates, allowing manual efforts to focus on real cases worthy of investigation. Due to this capability, “only once I started working at Thetaray,” explained Mr. Hazan, “have I felt that I'm one step ahead of the bad guys.”
The talk was supplemented by a brief introduction to Israel’s fintech sector by Liora Bazarsky, Head of the Fintech Sector at the Israel Export Institute. Ms. Bazarsky noted that driven by the pandemic, fintech has seen over US$2.3 billion in acquisitions in the first half of 2020, compared to US$4 billion for all of 2017-2020. She noted anti-fraud systems, payments, financial securities, client engagement, insurtech, and blockchain as strong areas in 2021.
Each of the solutions shared at the talk demonstrates a different approach to diversify the financial ecosystem. The participation of local bankers, startups, and regulators in this event may also help Taiwan do the same in its own fintech ecosystem. Next in the series, Australian startups will present on September 9, followed by the US on November 18.