In spring 2018, we launched our Innovation Studio in Tel Aviv, with the mission of being a gateway for Israeli startups to Visa and to the global payments ecosystem. Since then, we have made our first venture investment in Israel, showcased a number of Israeli startups in Visa Innovation Centers around the world, and kicked off collaboration projects with startups and Visa clients.
Our primary goal for the Tel Aviv Innovation Studio is to collaborate directly with Israeli Paytech companies as well as to support the Israeli Paytech ecosystem as a whole. As a market leader with a strong background in establishing partnerships, we know that collaboration drives innovation at speed. In that sense, our studio connects the wider ecosystem, including startups, banks and investors. In the last few months, we have hosted a few startups in our space, giving them the facilities to work and develop; we have provided ‘Payments 101’ sessions to our partners; and we have held community meetups, providing paymentsfocused content.
With our publication of the ‘Israeli Paytech’ landscape, we hope to give a better sense of the great ecosystem that is growing rapidly in Israel. Putting this landscape map together will increase Paytech industry engagement and enable more partnerships and innovation. Whether you are a venture firm considering investing in Paytech, a bank looking for advanced technology solutions or an entrepreneur looking to establish a startup of your own in this space, we want this map to be a starting point for you.
In the work that we have been doing over the last few months, we began to notice a concentration of startups in a few areas, and a connection to broader global trends. Below are some of the trends we notice, definitely not an exhaustive list:
Mobile is a Commodity
Mobile device distribution has reached a maturity point – the Mary Meeker 2018 internet trends report showed that in 2017 there was no growth in new smartphone unit shipment, for the first time since the smartphone was introduced. Mobile is the new standard - from transportation to banking and payments, many companies are thinking mobile first, if not mobile only. We see a high number of startups in the Mobile Wallet segment in Israel, and this connects well to this global trend. Digital wallet adoption has risen significantly in the past couple of years due to better, faster smartphones and mobile data connections. Consumers find digital wallets convenient because they are freed from the burden of physical currency, can automate their regular payments and use them as a loyalty platform. This trend is more evident in emerging markets, where mobile is the leading platform for most digital experiences.
Physical Retail is Alive and Kicking (and Smarter)
Visa loves eCommerce, and works hard to make it as safe, secure and simple as possible. While analysts and commentators have been predicting the death of brick-and-mortar retail since the expansion of the Internet in the 1990s, physical retail is still expected to represent 85% of global sales in 2020 (eMarketer). Not only is physical retail still alive, it’s getting smarter and more seamless. In Visa’s work across more than 44 million merchants around the world, we increasingly see that consumers have growing digital expectations for in-person retail. Innovative in-store experiences are combining the best of both worlds - digital information savviness coupled with the touch & feel advantages of the physical world. The in-store retail experience is becoming more consumer centric, with one objective in mind – making the purchase experience more flexible and seamless. The payment moment is now ubiquitous, and can take place before, during, or after shopping. We think that the benefits of convenience and personalized experiences will drive retailers to ultimately adopt technologies that will allow for new and innovative point of purchase experiences.
Digital Payments Are for Businesses, Too
The adoption of B2B electronic payments solutions by businesses is rapidly growing. Many companies are still paying their suppliers with paper checks, making this an unchartered territory for payment providers – the global B2B payments industry represents a $20 trillion opportunity. An interesting subset of this industry is small to medium-sized businesses that are becoming more sophisticated and demanding, which is a driver for significant service consolidation. A growing number of small business owners in the U.S. are digitally savvy millennials, which have a very high standard for products and services they pay for. Small business owners want their payments, inventory management, payroll and accounting services to be all accessible on a single platform. Startups in Israel have followed suit, and many of the startups that we listed under B2B do much more than the actual fund transfer. Visa has seen new local startup entrants to this space, although we believe that there is room for more Israeli startups to seize this enormous opportunity.
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We hope this map will add value to you. If you have questions, comments or like to connect - drop us a note at [email protected]