FinTech is the intersection between Finance and Technology and includes all activities that involve using innovation and technological developments to provide financial products and services. It encompasses a broad range of applications to improve and automate the delivery of financial services, including banking, insurance, investment, and payments. In this regard, Fintech activities are provided by established financial institutions and startups, which often complement banks by providing them with new technologies and services.
Several fintech sectors are disrupting the financial world. The sectors often overlap as fintech companies develop integrated solutions spanning multiple areas. Below, we mention some of them.
Digital payments use technology (e.g., a computer, smartphone, or a card) to substitute for or avoid cash. They are executed digitally or online to transfer payments between individuals or businesses.
Insurtech brings technological innovations to the traditional insurance industry. It may involve offering tailor-made policies and smart contracts, using alternative data to judge insurability and solvency, and applying dynamic pricing to potential clients.
Alternative lending is a form of alternative financing that bypasses traditional intermediaries. It has become a popular financing option for small businesses compared to obtaining a loan from a bank.
Digital Banks are financial institutions that operate primarily or exclusively online without physical branches. They offer banking services such as savings accounts, loans, payments, and other financial products through web-based platforms or mobile apps.
Cryptocurrency is a digital or virtual currency that uses cryptography for security and operates on decentralized networks based on blockchain technology. Unlike traditional currencies issued by governments (such as the US dollar or euro), cryptocurrencies are typically not controlled by any central authority.
Personal Finance and Wealth Management platforms provide tools and services to help individuals manage their finances, investments, and assets more effectively. They include robo-advisors, automated investment platforms, budgeting apps, and financial planning tools.
Regtech (Regulatory Technology) uses technology to help financial institutions comply with regulations more efficiently and effectively. It includes anti-money laundering (AML) solutions, know-your-customer (KYC) compliance, and regulatory reporting.
Enterprise Financial Management solutions target businesses and provide tools for financial management, accounting, invoicing, payroll processing, and other back-office functions.
Financial Inclusion solutions aim to provide access to financial services for underserved populations, including the unbanked and underbanked. This may involve mobile banking solutions, microfinance platforms, and alternative credit scoring methods.
LATAM
Latin America emerged as a relevant actor for Fintech startups last year. The IMF report “The Rise and Impact of Fintech in Latin America,” published in 2023, underlines this trend.
More than 300 million users of digital payments and more than 30 million users of digital banks in 2021
Digital payments reached $215 billion in 2021
The transaction volume of fully online digital banks was $123 billion in 2021.
Alternative finance lending reached $6 billion in 2020.
Digital payments and remittances and alternative financing (lending) platforms
Fintech companies in Latin America raised a record $14 billion, with 187 startups leveraging technology to offer innovative financial products.
As of 2023, there were 1,000 active fintech in LATAM.
FinTech in Israel
The Fintech sector in Israel is one of the most developed, along with Health Tech, Enterprise, IT and Data Climate Tech, Agri-Food Tech, and Cybersecurity. According to official data, there are:
460 Fintech startups
Four large venture investment funds.
During 2023, 1.2 billion dollars were raised in investments in this sector, and 59 rounds were carried out.
The Fintech ecosystem also includes an NGO that brings together the main actors from the private and public sectors and an accelerator that supports early-stage startups.
A global event is held once a year, and smaller events are held periodically.
FinTech between LATAM and Israel
The collaboration between Latin America and Israel in the fintech sector has gained momentum in recent years, driven by mutual benefits and synergies. Let's delve into some key aspects of this collaboration:
Investment and Funding: Both regions have seen significant investment and funding in the fintech sector. LATAM has witnessed a surge in fintech investments, with billions of dollars poured into startups offering digital payments, alternative lending, and other financial services. Similarly, Israel's fintech sector has received substantial investments, reflecting confidence in its startups and their potential for growth and disruption.
Market Entry and Expansion: Israeli fintech companies, like Rapyd and Nayax, have ventured into LATAM markets, leveraging local partnerships to offer innovative fintech-as-a-service solutions. These partnerships enable seamless integration of digital payment systems, e-wallets, and other financial services, catering to the evolving needs of consumers and businesses in LATAM.
Technological Innovation and Cross-Border Collaboration: Against the growing cooperation between Latam and Israel, noga started working with financial institutions. In particular, noga worked with Banco Santander, the Spanish multinational bank, and Banco Industrial from Guatemala. For the former, Noga invited Israeli cybersecurity startups and scale-ups with commercial activities in Santander footprint countries to participate in the Santander X Global Challenge. For the latter, noga scouted Israeli technologies in cybersecurity, AI solutions, and fintech solutions related to credit scoring. For the latter,
Israel's expertise in cybersecurity, artificial intelligence (AI), and fintech complement LATAM's own fintech landscape. Collaborations between Israeli startups and LATAM financial institutions, such as Noga's partnerships with Banco Industrial and Banco Santander, drive digital transformation and enhance financial service competitiveness. Overall, the collaboration between LATAM and Israel holds immense promise for driving innovation, expanding market reach, and addressing emerging challenges. As both regions continue to harness their strengths and foster partnerships, we expect further advancements and synergies in the fintech ecosystem. Noga will continue to support those trends.
