Revolut and Rapyd Set Sights on Israeli Market: Ambitious Plans for Lean Bank Operations

In recent developments, two major international fintech companies—Revolut and Rapyd—are positioning themselves to enter Israel’s banking market. Both are in active discussions with the Bank of Israel to obtain licenses that would allow them to operate as “lean banks.” This move could disrupt Israel’s traditional banking sector and introduce more competition to a market long dominated by established financial institutions.

The discussions come at a crucial moment when the Bank of Israel is evaluating reforms that could allow non-bank entities to accept customer deposits. These fintech giants are eyeing this new avenue, and their entry could pave the way for a more diverse, competitive landscape in Israeli finance.

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The Bank of Israel is currently engaging with two major fintech firms—Revolut and Rapyd—that aim to obtain a lean bank license. This license would allow them to accept customer deposits and offer services similar to traditional banks. According to Daniel Hahiashvili, the Supervisor of Banks, these conversations signal a potential shift in the Israeli banking landscape. Revolut, a British fintech company valued at \$45 billion, is actively seeking a lean bank license to offer interest-bearing deposit accounts and other banking services in Israel. Meanwhile, Rapyd, an Israeli-founded fintech company valued at \$4.5 billion, is focusing on establishing a clearing infrastructure and applying for a clearing license to offer more competitive credit card services.

The Bank of Israel is in the process of advancing a new framework that would allow non-bank entities to offer deposit services. This move aims to open the market and reduce the stronghold of traditional banks, which have long profited from the gap between low deposit interest rates and high credit interest rates. The government’s goal is to encourage more competition and address the disparity in rates. If the lean bank licenses are granted, both Revolut and Rapyd could significantly expand their services in Israel, offering alternative banking options to customers and businesses alike.

What Undercode Says: The Shift Toward Lean Banking in Israel

The entry of fintech giants like Revolut and Rapyd into the Israeli market indicates a profound shift in the global banking landscape. For years, traditional banking institutions in Israel have enjoyed the benefits of offering minimal deposit interest rates while profiting from high loan interest rates. The introduction of lean banks could offer a more balanced approach to deposit and lending services, potentially offering better interest rates for consumers and businesses.

The lean bank framework proposed by the Bank of Israel is designed to lower entry barriers for new players and introduce competition into a market that has been dominated by a few large banks. By granting licenses to non-bank financial entities like fintech companies, insurance firms, and even large corporations, Israel could foster a more competitive and diversified financial ecosystem.

The concept of lean banking, where institutions can accept deposits without the overhead costs of traditional banking operations, aligns well with the fintech-driven revolution happening globally. These digital-first banks can offer more attractive deposit interest rates and lower lending rates, creating a more efficient financial system.

Revolut’s potential entry is particularly significant. The company already serves millions of customers worldwide and is keen to bring its competitive pricing model to Israel. Its focus on digital banking and its ability to offer interest-bearing accounts could challenge local banks’ outdated models. With its local presence in Israel, Revolut is well-positioned to capitalize on the lean banking framework if the Bank of Israel grants it the necessary license.

Rapyd, though smaller in valuation compared to Revolut, offers a different angle. The company’s expertise lies in international payment infrastructure, serving businesses and consumers across the globe. By entering the Israeli market and offering services such as credit card clearing, Rapyd can tap into the underserved small and medium-sized business sector. If granted a lean banking license, Rapyd could further expand its services by accepting deposits, broadening its reach in Israel’s financial ecosystem.

However, for Israeli banks, the possibility of facing competition from these fintech giants is both an opportunity and a challenge. While the new reforms promise to democratize the market, the question remains whether traditional banks will be able to innovate quickly enough to maintain their dominant position. The next few years will be critical in determining how the Bank of Israel implements these changes and whether Revolut and Rapyd will successfully challenge the status quo.

Fact Checker Results ✅❌

Fact: Revolut and Rapyd are indeed in talks with the Bank of Israel regarding lean banking licenses. ✅
Fact: Both companies have international reach and significant financial backing, positioning them as serious contenders in the Israeli market. ✅
Misinformation: There are no confirmed reports that Israeli banks are at immediate risk of collapse due to these fintech entities, though competition may intensify. ❌

Prediction 📉

In the coming years, Israel’s financial landscape could see significant changes as fintech giants like Revolut and Rapyd start offering services traditionally monopolized by established banks. If these companies are granted lean bank licenses, they could introduce more competitive interest rates on deposits and loans, ultimately benefiting consumers and businesses. The Bank of Israel’s push for reforms could create a more diverse financial ecosystem, fostering innovation and increased competition. However, traditional banks will likely respond by ramping up their digital offerings to retain market share, leading to a more dynamic and evolving financial environment.