Tel Aviv is fast gaining a reputation as a FinTech powerhouse, serving as a base for both emerging startups and forward-thinking financial services firms. FStech’s Anthony Strzalek met the CEO of Leumi Tech, Yifat Oron, and asked her about the digital developments at parent company Bank Leumi, as well as the wider Israeli technology landscape.

Anthony Strzalek: Can you tell me a little bit about Bank Leumi?

Yifat Oron: We are a group of banks. We have an Israeli-owned bank, we have a US wholly owned bank and we have a UK wholly owned bank. We are very well known in the industry for looking five or 10 years down the road and trying to work out where the world of banking is going. What I do is run the technology banking side, which we launched about three years ago. We’re working with most of the Israeli startup companies at the moment, about 4,500 in total, so we know a lot about FinTech and technology in general.

AS: Leumi Tech is a subsidiary of Bank Leumi. So how closely do you and the rest of the Leumi Tech team work with the bank?

YO: The big trick is that we are actually part of the bank. The major innovation was to take the infrastructure that already existed, with bankers who have been in business for many years. So it’s not separate, it’s a lane over from the infrastructure of the bank. We have dedicated bankers, and we have a specific centre servicing the technology companies, but a lot of the stuff we are sharing with the rest of the bank. So we did it in a unique way and it allowed us to hit the ground running very quickly. So from founding in January 2014, we launched in May 2014, and we got to the point of 4,500 companies in a very short space of time just because we had a very good working infrastructure.

AS: How big is your team at Leumi Tech?

YO: We have about 100 people involved in technology banking. One of the things we try and do to stay unique is be very engaged in the ecosystem and we try to be more than just a bank to our clients. For example, we do a lot of things with the community. We’re very involved with the VCs, with the accelerators and the incubators. We provide a lot of value-add meet-ups, lectures, conferences, all sorts of things that allow us to stay in touch with our clients. It also allows us to maintain our image because we have to know what’s going on in order to be smarter bankers. So our expectation is that when a new customer meets one of our bankers they’re usually surprised how much the banker knows about what they’re doing.

AS: Israel is starting to get a reputation as a strong technology hub. How does it differ to the UK and the US, for example?

YO: If we look at what makes areas around the world tech hubs I think the reasons vary. Not only is Israel a young nation but we are also a small nation, without natural resources and surrounded by people who are not our best friends. So we had to do a lot of things when we were founded as a state to sort of allow for that and now we have about 1,000 new startups every year, which is a lot. One very important thing is that Israeli companies, because we’re a small state, have to very quickly sell globally. They can’t really rely on the Israeli market so we’re very global in the way we do our business early on. Another thing which is very unique about the Israeli culture is that it allows people to fail and it’s considered OK as long as you learn from your mistakes. So what this means is that it’s OK to be an entrepreneur even if you know the probability of success is very low, because even if you fail people give you credit for trying. Some aspects are similar and some are unique. There are things that have to be similar to other places because if you want to get someone like Sequoia, for example, to invest in you, you can’t be completely different to what they’re used to. So the companies look very similar, legal looks the same, accounting looks the same, the whole corporate governance is very Silicon-valley style. We are a little different in that we’re a little more daring I think.

AS: Something we covered in FStech recently was the launch of your new mobile bank, Pepper. Could you tell me more about it?
YO: So I think Pepper is very unique because it encapsulates the set-up of a startup, which means it is very agile. But behind this young startup there is a bank that has 115 years’ worth of experience and has data on many millions of customers. Pepper users have payment, day-to-day banking, investments, everything all on one platform. Not only that, but it also allows us to give our customers a very personalised offering. If I open my Pepper app and you open your Pepper app, we’re not going to see the same screen because we have different things we’re interested in. At the moment we are seeing that people are willing to do a lot of stuff with startups they don’t know, but when it comes to their money they’re a lot more careful and the issue of trust is huge. So the fact that we are a startup that has more than 100 years’ worth of business I think gives people the ability to enjoy the startup flavour, while still sleeping at night because their money is safe.
AS: What do you think are going to be the big technology drivers in the FinTech space over the next few years?

YO: I think what’s going to be big in FinTech is anything that allows the banks or service providers to personalise stuff to you given the Big Data that’s out there – all the AI, all the deep learning – and to be able to predict what you need and what your next steps are. Another major trend has to do with the problems of banks and FinTech companies when it comes to the tightening of regulation in the finance world in general. There’s going to be a lot of demand for all kinds of regulation technology, particularly with all the issues around KYC. The FinTech companies, when they become big enough, are going to have to deploy all kinds of best practices and they’re not going to be able to afford a team of 100 people in compliance, so a lot of these things are going to require automated systems.

AS: Cyber security is a big issue at the moment. We’ve seen a number of high profile attacks, for example at Tesco Bank and Lloyds in the UK. With the rapid increase in technology, how can cyber security keep apace of these threats?

YO: First of all, we’ve been having security issues forever; it’s just now we just have more digital stuff to hack. We used to call the startups who treated it ‘software security’ rather than ‘cyber’. So we’ve been having these issues for a long time but I think that both the attackers and defenders are becoming smarter. The funny thing is because of these attacks we’re seeing new businesses starting. For example, there’s now businesses cropping up for the insurance of cyber. Another thing that we’re seeing is the emergence of cyber security management. If you’re a big bank like Barclays, for example, you have hundreds of different solutions in your organisation to treat cyber. Somebody needs to manage that so some companies are turning to technology firms just for this. So it’s an opportunity for some, but in terms of what to do, I think it’s very tough to answer this because it’s an ongoing race between the attackers and the defenders.

AS: Finally, can you tell me a bit about yourself? What is your background and how did you end up at Leumi Tech?

YO: So I’m Israeli. At a certain point in my life my parents went abroad so we moved to the United States where I went to high school and then to university. The military brought me back home. I went to the Israeli Technion, which is like the MIT of Israel, after which I enrolled as an officer in the Ministry of Defence running the budgets of all the military R&D. After that I left and went into management consultancy, did my MBA, moved to the US and began working for JPMorgan Chase. Finally, I again returned to Israel and did almost 11 years in venture capital until I met our CEO, who was thinking about Leumi Tech. After I heard the vision I thought this is a huge thing to do and very exciting, so I ended up joining in January 2014.

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