Billionaire Nacht seeks to set up new digital bank in Israel

Billionaire Nacht seeks to set up new digital bank in Israel

At a conference earlier this month, banking regulator Hedva Ber said conditions were ripe for a new bank to join Israel’s current five

Check Point Software Technologies co-founder Marius Nacht (Courtesy)
Check Point Software Technologies co-founder Marius Nacht (Courtesy)

Billionaire Marius Nacht, the co-founder of the Israeli cybersecurity giant Check Point Software Technologies Ltd., is in talks with Israeli regulators to set up a new digital bank in Israel, a person familiar with the matter confirmed on Monday.

Nacht is leading a group of investors that has been in talks with Israel’s Banking Supervision Department at the Bank of Israel to get a permit to set up a digital bank in Israel, the source said. TheMarker business daily on Monday became the first to report the news.

A spokesman for the Bank of Israel declined to comment.

David Zaken, a former banking supervisor, is in charge of the negotiations between the group of investors and the Bank of Israel, the source said. Nacht and  his partner in the venture, Ezra Uzi Yemin, the CEO of energy company Delek US Holdings Inc., will jointly inject some $60 million into the initiative and plan to raise an additional $60 million from their other partners or via issuing shares on a stock exchange.

Nacht and Yemin believe that the Israeli banking sector is on the cusp of a major technological revolution, and the two want to be at the forefront of this push, the person said. The process is likely to take a year or a year and a half before the digital bank is set up, the source said.

The group has hired a consultant and is on the hunt for a CEO, the person said. If Nacht gets the banking permit, it will be the first time in decades that a new bank is set up in Israel.

Hedva Ber, Supervisor of Banks at the Bank of Israel, at a press conference in Tel Aviv, May 24, 2017 (Courtesy: Shoshanna Solomon)

There are five commercial banks operating in Israel, and the sector is dominated by the three largest: Bank Hapoalim Ltd., Bank Leumi Le-Israel Ltd. and Israel Discount Bank Ltd. In a bid to increase competition in the sector, make banks more efficient, and lower fees for consumers, the regulator has implemented reforms to boost the use of technology at the banks, helping cut costs and the number of branches and employees.  The two largest banks will also need to sell off their credit card units and the Banking Supervision Department has been seeking to promote the entry of a new bank, a digital one, in Israel.

Hedva Ber, the Supervisor of Banks at the Bank of Israel, said at a fintech conference in Tel Aviv earlier this month that a number of entities have approached the department, expressing an interest in setting up a new bank.

“For many years, no new bank has been set up in Israel,” Ber said at the conference. “Now technology as well as regulation enables this. A number of entities have approached us.”

These entities are eager to set up a new digital bank in Israel, with a focus on servicing households and small businesses. Some of the entities and entrepreneurs who have expressed an interest are experienced; they have activities, capital and goodwill, she said. Others are new, more niche players — smaller entities. “I hope that in the coming year we will give a permit to a new bank in Israel,” Ber said.

Nacht and Yemin have told the regulator they wish to set up the bank under certain conditions, which include the state setting up an application programming interface (API), a technology protocol that allows diverse software components to communicate with each other, enabling a flow of information to increase competition; having regulations in place regarding insurance of saving accounts; and the existence of a body that will provide computing services to the banks. All of these conditions were part of recommendations made by a government panel set up to increase competition in the banking sector.

Any new bank set up in Israel “will take time to launch,” Saar Golan, an equity trader at Meitav Dash Brokerage in Tel Aviv, said in a note to investors on Monday. It will take “even more time to prove that a digital bank could take significant market share away from the Big 5 traditional banks.”

Nacht is the co-founder of Check Point Software Technologies, a company that is traded in New York at a market value of some $15 billion. He owns a 4% stake in the firm.

Earlier this month, the billionaire entrepreneur said he invested in a Swiss data-driven asset management startup, Numbrs, indicating that he sees innovative financial technologies as an investment opportunity.

“I think that both the financial sector and the health care sector are about to witness a major technological change,” said Nacht, when announcing his investment in Numbrs.

Nacht has also set up a healthcare fund that aims to invest in mid to late-stage life sciences companies in the field of digital health. The fund said in April it raised $200 million from a number of investors, and last week it said that Credit Suisse AG, the Swiss multinational investment bank, will pump some $250 million into the aMoon newly set up second fund.

Calcalist reported on Monday that the Israel Free Loan Association, a Jewish interest-free loan organization that aims to help Israelis help set up small businesses, has also approached the banking supervisor expressing an interest in setting up a social bank, which in its first stage will provide loans to those of lower socioeconomic status.

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