Shashua’s digital bank targets $ 100 million in funding
Shashua has invested $ 65 million in digital banks to date and will remain the majority shareholder with over 50% stake after the funding round undertaken by Rothschild & Company Bank.
About half of the proceeds will go to various costs of setting up a bank, including R&D and marketing ahead of its planned launch early next year. The remaining $ 50 million will be used to meet the capital adequacy requirements set by the Bank of Israel.
Amnon Shashua Photo: courtesy
“In recent months, we’ve been approached by investors interested in the technology we’ve developed,” Digital Bank said in response to a Calcalist report. “We are looking at key funding cycle options ahead of the bank’s year-end launch, readiness to meet capital needs, and ongoing technology development.”
The digital bank is currently operating in pilot mode and will officially open to the public in January 2022. The banks’ forecasts presented to potential investors are expected to generate revenue by 2023, reaching $ 125 million in revenue.
Digital Bank is a new bank founded in Israel for the first time in 43 years. Three years ago, Check Point co-founder Marius Nacht first launched a digital banking project, but resigned from the initiative last May, leaving Shashua as the majority shareholder. Shashua then promised to inject $ 60 million in shares into the bank.
Digital banks already have a banking license to operate in Israel and today employ 150 people. The bank also signed a credit card issuance agreement with Isracard and registered as a business partner on the Tel Aviv Stock Exchange for its planned venture capital market activity.
The pilot program will have hundreds of participants, with a further 1,000 expected to grow in the third quarter. At this stage, the pilot project includes basic banking services and will start trading in securities in the future.
Digital Bank believes the technology is based on artificial intelligence and will add value to the market and is based on Shashua’s track record. That is, using Mobileye in the automotive industry and Orcam in the medical device sector for the visually impaired.
According to an analysis conducted by a digital bank, the average Israeli household pays an average of 150 NIS (about $ 46) per month in bank charges. Digital banks don’t offer free services, but they do offer a fixed price that includes all basic services at no additional cost.
In marketing to investors, digital banks pointed out that there are many advantages to investing for several reasons. In particular, the high profit potential, the low cost model and the fact that the Israeli economy is growing.
Even traditional banks today are much more digital than they were five years ago, and the Covid-19 crisis has only accelerated digital transformation. In recent years, other digital banks have been launched, such as Atom and Monzo in the UK and N26 in Germany, which have not shaken the industry in which they operate.
The main advantage of digital banks is their relatively slim spending model, as they don’t operate physical branches and have few employees. That said, the tech infrastructure also requires a lot of spending, and the digital bank employees come from the tech department, which tends to have very high salaries. So far, digital banks have not been able to create a price shock wave, and Israel’s first digital banks have not claimed to be completely cheap.