Israeli insurance group launches next-generation fintech arm

By Joanna England
Migdal Insurance to invest up to US$2bn in fintech enterprises over the next two years...

A leading Israeli insurance company has announced plans to launch a new fintech investment arm which will concentrate on start-ups, funds, and established companies.

The opportunistic move will mean Migdal Insurance stays ahead of the rapidly increasing fintech growth curve. According to recent forecasts, the global fintech market was valued at $127.66bn in 2018. The fintech industry will also grow to $309.98bn (at an annual growth rate of 24.8%) by 2022.

Another study by CBInsights showed that from September 2019 to April 2020, the number of fintech unicorns increased by 76%, and their estimated value rose by 74%, from US$ 144.9bn to US$ 252.6bn. Investment transactions in fintech companies also surpassed 3,280, aggregating more than US$ 150bn, as reported by KPMG. 

The digital transformation of businesses, especially during the coronavirus crisis, has significantly accelerated the development of fintech, which now has a significant foothold in the financial industry and is commonly believed to have reached maturity.

The uptake of fintech has been most notable in developing countries, with China and India leading the way followed by APAC nations. This demographic makes up an estimated 87% of customers implementing fintech technologies. 

Adoption rates in the West are also rising, hitting 73% in the Netherlands, and 71% in Ireland and the UK, the latest data suggests.

Expert analysis

Migdal released a statement saying it had created a broad platform for fintech investments which includes examining new opportunities with global enterprises. A specialised team of fintech analysts has also been established to examine the latest data. 

Ran Oz, CEO of Migdal Insurance, explained, “The growing fintech sector has recently gained substantial momentum and maturity. We are high achievers, aiming to position ourselves as a leading financial investor not only locally, but also globally.”

Alongside the investment arm launch, Migdal recently announced it will invest $100mn in consumer loans in the US. The investment will be carried out through Pagaya, a fintech company that handles investments in US consumer loans via a technology-based decision-making process. A soft commitment agreed on by the companies, will also see further investments of $150mn.

Oz believes the key to success in fintech investment lies in knowing the market trends. He said, “Maintaining an edge in this innovative field will allow us to generate high yields for savers and enrich our investment portfolio with the new generation of finance. This is yet another step in our investment strategy of a strong shift from traditional finance to innovative financial sectors that we deem as the future leaders of the finance industry.”

As well as targeting fintech enterprises, Migdal will pursue opportunities in all fields currently affected by the fintech industry. These will include insurtech, capital market trading, lending (in place of bank credit), personal finance (day-to-day money management tools), payments and debits, money transfers, blockchain, risk management and more.

Migdal’s positioning as a dominant institutional investor with the largest investment portfolio in the sector will enable it to identify diverse opportunities and focus on advanced financing rounds, continued Oz, who said Migdal may also consider some first-round investments.

He added, “Having honed our expertise in this field over the recent months, accumulating extensive knowhow, we are now ready to launch an extensive investment operation."


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