Israel is about to launch the nation's first new bank in four decades

Israel’s banking industry is about to face its first new competitor in 43 years.

One Zero Digital Bank, controlled by Mobileye co-founder Amnon Shashua, on Monday received its final regulatory approval for a full and permanent banking license, becoming the first new Israeli bank in over 40 years.

Receiving a permanent license was contingent upon the bank’s completion of several criteria set by the Bank of Israel, when One Zero was first granted a temporary, restricted license in 2019 to operate on a trial basis.

One Zero was required to complete administrative and operational preparations to establish the bank, build the information systems and bank infrastructure, connect to the central bank’s payment and settlement systems, complete a successful pilot program and raise the necessary capital, among other conditions.

“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,” according to the Bank of Israel’s announcement.

One Zero, having met the criteria, will operate as an independent bank with equivalent status to all other banks in Israel which, incidentally, it plans to compete with. The bank will be managed by its board chairperson, Israel’s former Finance Ministry Accountant-General Shuki Oren, along with tech entrepreneur, Gal Bar Dea, CEO of One Zero.

"Obtaining the permanent license is an important milestone on the way to genuine competition in Israeli banking. The Bank of Israel has confirmed that we are ready and able to offer a complete, secure, competitive alternative for households in Israel,” said Oren.

The new bank will not have any physical branches and instead will operate by integrating human bankers who will provide 24/7 customer service through an online chat system and a call center. The bank offers all the same banking services that Israelis are accustomed to, including personal and joint accounts, loans, deposits, credit cards, stocks and foreign currencies. Mortgages will be added to the list of offerings in the future.

In a Calcalist article published in June, Bar Dea said Israelis should get ready to leave their old bank behind as One Zero leads “the charge to assimilate artificial intelligence into the financial ecosystem” to create fair and personal financial services.

Bar Dea said there are “incredible opportunities” in the Israeli market where “42% of households are dissatisfied with their existing banks, according to Bank of Israel research.”

The nation’s five largest banking institutions currently hold some 98% of the market.

Israel’s central bank – the Bank of Israel, established in 1954 to support the government’s objectives and a stable financial system, said that One Zero’s newly-obtained license is “an important milestone on the way to genuine competition in Israeli banking.”

“After 43 years, a new bank is being established in Israel, and this is further good news for competition and innovation in the banking and financial industry," said Amir Yaron, governor of the Bank of Israel since 2018.

"I congratulate the management and employees of One Zero Digital Bank for meeting the challenges involved in establishing the bank,” Yaron said. “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.”

"This is a happy occasion for me as supervisor," added Yair Avidan, supervisor of banks. "The banking supervision department has worked hard in recent years to create the conditions and remove barriers to enable the establishment of a new bank in Israel."

“We have guided, and we will continue to guide, the [One Zero] bank in its work, we will supervise its integration into the banking system, and we will work to assist any other entrepreneur that wants to establish a bank in Israel,” Avidan said.