First digital bank opens in Israel

Newly authorized by the Bank of Israel, the country’s new digital bank One Zero is taking on several hundred customers each week and 75,000 more people interested in the new platform, Al-Monitor writes.

The governor of the Bank of Israel and the Israel Supervisor of Banks announced Jan. 10 that all restrictions have been lifted from the new One Zero digital bank, which offers "private banking for everyone." “Following 43 years in which no new bank was established in Israel, there were numerous innovative challenges involved in establishing the bank. The bank was established with the close guidance of many entities at the Bank of Israel. The bank’s readiness was examined in terms of information security and cyber-protection, technological risk management, evaluation of the quality of risk management, and the supervisory and control tools existing at the bank,” read the announcement. 

Bank of Israel Governor Amir Yaron was quoted as saying, “I congratulate the management and employees of One Zero Digital Bank for meeting the challenges involved in establishing the bank. This process, combined with other steps we have advanced, has the ability to increase competition in the banking system. … I wish the bank success, and hope that its establishment will pave the way for other banks to contribute to competition and to the well-being of consumers.”

Most banks in Israel offer a digital platform, but it simply mirrors the original bank and is not an entity of its own. In the first years of the State of Israel, many banks operated in the country, including several independent one, that do not exist anymore. The small banks closed over the years or were bought up, and there are currently only five big banking groups. Now, One Zero is likely to profoundly change how banking is done in the country.

The project of the independent One Zero digital bank has been in the works since 2019. Amnon Shashua, an Israeli computer scientist and businessman, was dabbling with all sorts of initiatives. His success record was already extraordinary. Two years earlier, he had sold Mobileye, which he co-founded, to Intel for $15.3 billion. Shashua was sitting in an ice cream parlor in Tel Aviv with a couple of friends, discussing people's biggest challenges in managing their money. They realized that people's finances are spread all over the place. Many people entrust some of their money with investment houses and some in pension funds. According to Israel's Central Bureau of Statistics, 50% of all Israeli households reportedly overdraft at least once a year. The group came up with the idea for a new bank that would use artificial intelligence to make the lives of its costumers easier.

The idea was simple: Use artificial intelligence to evaluate the costumer’s financial situation every day, including rent, bills, incoming funds and debt. Then an adviser (a real person) enters the picture, offering comprehensive solutions. If a customer wants to take out a loan to buy a new car, a traditional bank's advisers will explain the conditions of the loan it could offer. Not One Zero. The digital bank's adviser will examine the whole picture and might suggest dissolving a small trust fund that has been gathering dust for years with little revenues or advise selling underperforming stocks.

One Zero follows Israel's open-banking reforms adopted last October. Recent Israeli legislation has enabled costumers to move from one bank to another more easily, increasing competition between banks. The open-banking reform allows customers to share their banking records with their potential new bank. With this information, the potential bank could offer the costumer a more competitive package.

One Zero also offers a flat monthly fee for all banking operations. For Israeli costumers, it is a revolution. There will be no more endless lists of different fees for different operations and no more surprises at the end of the month.

A source in One Zero told Al-Monitor that this new feature will require some time for Israeli costumers to get used to. Many Israelis negotiate the principal fees with their banks, but are unaware of other fees they must pay. They might believe that they pay far less than the actual costs. Paying a fixed sum once a month will make everything transparent, easier and also cheaper.

The source explained that the bank is now in the midst of a soft launch, accepting a few hundred costumers every day out of the 75,000 people on its waiting list. The bank is still developing tools like a system for depositing cash, but it hopes to be fully ready in just a few more months.