Tencent, Julius Baer Back First New Israel Bank in Over 40 Years

(Bloomberg) -- Israel’s first new bank in more than four decades has won the backing of investors including Julius Baer Group Ltd. and China’s Tencent Holdings Ltd. as it mounts a challenge to take business from the country’s biggest lenders.

Founded by serial entrepreneur Amnon Shashua, First Digital Bank raised $120 million in its biggest funding round to date, according to a company statement on Tuesday. The round, which was also bankrolled by Japan’s SBI Holdings Inc., values it at $320 million.

The upstart is looking to dent the dominance of the five main domestic banking groups in Israel’s highly concentrated finance industry, led by Bank Hapoalim and Bank Leumi le-Israel Ltd. It also eventually plans to expand globally.

First Digital Bank uses artificial intelligence to provide all the services of traditional lenders but without the branches. It will begin opening its first accounts early next year for some 60,000 people on its waiting list, and then gradually expand its services to the rest of the country, Shashua said in an interview.

“The idea is to provide a service that the ultra-wealthy get but at scale,” said Shashua, who is FDB’s controlling shareholder.

Well-funded digital banks like Brazil’s Nubank, Russia’s Tinkoff Bank and San Francisco-based SoFi Technologies Inc. are sprouting up to vie for the more digitally savvy generation of clients. FDB’s machine learning platform will analyze clients’ financial history to anticipate and recommend ways to optimize payments, savings and investments, among other things. 

Shashua said his “eureka moment” happened when he noticed that, of the more than 5 million bank accounts going into overdraft at varying frequencies, about half were needlessly ending up in the red. It dawned on him as a result that there was a big enough market in Israel that needed automated help to manage finances.

The latest round follows a $65 million initial investment by Shashua. He also founded other businesses such as OrCam and Mobileye, sold to Intel Corp. in 2017 for more than $15 billion.

Rothschild & Co was FDB’s sole financial adviser on the transaction.

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