Bank of Israel gives green light to Palo Alto’s Nir Zuk for new digital bank
The approval marks second time in three years that a new bank will be set up in Israel; plan is for digital bank to offer attractive interest rates and services without commissions
Sharon Wrobel is a tech reporter for The Times of Israel.
Israel’s central bank on Sunday granted a conditional license for the establishment of the country’s second digital bank, co-led by Nir Zuk, the American-Israeli founder of the cybersecurity firm, Palo Alto Networks, Inc.
Bank of Israel governor Amir Yaron and Supervisor of Banks Yair Avidan said in a statement that following the completion of the review and inspection process, the central bank chief is ready to issue a banking license and control permit for the new lender, called Esh Bank Israel, Ltd.
The approval is the second license in three years that the Bank of Israel has approved the establishment of a new bank, in an effort to boost competition in the highly concentrated banking sector dominated by five banks.
Esh will be digital, will have no physical branches, and will focus on banking services for households, and small businesses, including providing credit, receiving and managing deposits and current accounts, and providing advanced payment services. Former head of the Israel Securities Authority Prof. Shmuel Hauser will serve as the chairman of the new digital bank.
Zuk, a former engineer at Israeli cybersecurity firm Check Point Software Technologies, set up the competing Santa Clara, California-based Palo Alto Networks in 2005. Other members of the founding group of entrepreneurs of the digital bank initiative include businessman Yuval Aloni and Kobi Malkin, a former CEO of Bank Massad, who will serve as CEO of Esh.
“We see great importance in the entry of banks and additional new players into the banking system in Israel, so that they contribute to increasing competition and innovation in the financial system,” stated Yaron. “It is evident that the group of entrepreneurs is diverse and brings with it strengths in various fields, including entrepreneurs with international technological and business experience.”
Passing the initial regulatory hurdle and the receipt of the control permit will allow the group of entrepreneurs establishing the digital bank to move forward with the mechanical, operational and regulatory preparations required for the start of the bank’s operations. This will include testing phases of the new technology, completing the recruitment of the management team and hiring additional bank staff. The establishment process is expected to take about a one-and-a-half years, the central bank said.
“We have a long way to go,” said Hauser. “The uniqueness of our bank is the synergy between technology and banking.”
Hauser announced that the “groundbreaking” Israeli technology will allow for extraordinary operational efficiency that will be rolled out directly to customers.
“This will be reflected in attractive interest rates, banking services without commissions, without subscription fees, and without preconditions, such as salary transfer,” he remarked.
The new bank will be supervised by the Bank of Israel’s supervisor of banks to ensure its stability and to safeguard its depositors’ funds, similar to the oversight of other banks in Israel. Like every other bank in Israel, the new lender will have access to all of the Bank of Israel’s monetary instruments.
Esh follows in the heels of the first fully digital bank, One Zero Digital Bank Ltd., set up by tech entrepreneur Amnon Shashua, the nation’s first new bank in more than 40 years. Last year, the lender received final regulatory approval after being granted a banking license from the Bank of Israel in 2019, in a bid to inject competition into the sector. Shashua is also the founder of autonomous driving systems company Mobileye (an Intel subsidiary).