There are currently around 400 Financial technology companies operating in Israel, but only a quarter of them provide services to the Israeli public. This is mainly regulatory: a financial firm has to adapt to the destination country’s regulatory requirements, and small Israel does not merely justify the efforts of companies seeking a large market share.
Therefore, the only three Financial technology companies operating in the US market, namely BlueVine, FundBox, and Behalf, all offer a solution to a big problem in the US business market – providing a line of credit to small businesses.
For years, the US banking system has struggled to meet the needs of small and medium businesses.
These three companies provide financing because of the difficulty of conducting risk assessments for these companies. The time and resources required by the bank to approve small loans have led to a boom in the non-bank credit market, with giants such as Amazon and PayPal providing such services to their customers.
It may be somewhat surprising that some Israeli entrepreneurs have seen the technological opportunity lurking here, providing quick and simple financing solutions to hundreds of thousands of companies. Technological advancements in machine learning and the shift to cloud computing have revolutionized the ability to manage risks in this area.
Not only is this considered a considerable cost saving, but big data enables us to get a more accurate result. Non-bank credit services usually rely on prompt registration of the service and obtaining approval for funding within a few minutes, usually by gathering data from various online sources and a quick analysis of risks. Consequently, the underwriting process, valued at several thousand dollars per client of the bank, becomes scalable and incredibly cheap for technology companies.
The following three companies differ from each other in their market share and annual transaction volume. Still, the coming year is expected to be very significant for all of them, with expansion at the product, customer, and service level.
Financial technology – BlueVine
The startup BlueVine continues to show impressive year-to-year growth. The company, which started providing billing-related financing, offers a wide range of financial products that include a more massive credit line.
Financial technology – In 2017, the company provided loans amounting to about half a billion dollars, and this amount doubled in 2018, making it an activity volume exceeding 100 million dollars per month. But the goal that BlueVine has always mentioned is to launch a financial operating system for small businesses: it is expected to materialize this year, making the company a more critical player in the US financial system.
Fundbox also started its journey by offering small businesses credit services against future payment bills. Its founders understand that the biggest lender to small companies is the sellers who sell them with credit. This success led her to chart a new goal of creating a B2B peer-to-peer credit network.
Financial technology – The advantage of Fundbox is that its marketing efforts are directed at suppliers, allowing their customers to pay through the Israeli company’s platform. This method enables the company to create a client network that expands in a semi-organic manner.
Today, Fundbox also operates only in the US, but unlike the other two companies on the list, it also works in other markets. Creating a B2B peer-to-peer network While a neat solution to lending in the US financial market, it is also applicable in other markets, where the problem is perhaps less severe. There is a good chance then that by the end of the year, we will hear about the company launching operations elsewhere in the world as well.
Behalf offers a model for working with both parties of a transaction (seller and buyer), whereby buyers are added to the platform for the first time at the time of purchase, but financing is only created when the transaction is executed, just like a credit card.
Behalf is the oldest company on the list but also the smallest, with just under 100 employees. This did not prevent it from becoming one of the most popular non-banking solutions in the field. This is also why it is the first Israeli company in the area to win an investment from the new fintech fund of global credit giant Visa.
Financial technology – As part of the agreement between the two, Visa offers business customers on Behalf a payment solution with a virtual credit card that provides instant credit for their business purchases. Working together with Visa, along with the presence of other senior executives from the credit world on the company’s board of directors, will allow the company to go a long way in the next year. From a regulatory perspective, these collaborations also allow small or local startups to launch large-scale activities even without a significant investment.