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Revolut's Entry into Israel: Competition Limited to Fees, Not Core Banking
Fintech firm Revolut received a conditional banking license in Israel, but its impact is expected to be limited to fee-based services like currency exchange and international transfers, rather than core banking functions.
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What happened
- 01Revolut received a conditional banking license in Israel on November 10th.
- 02Revolut's revenue primarily comes from fees, unlike Israeli banks which rely on interest.
- 03Revolut may lower costs for foreign currency and international transfers in Israel.
- 04Attracting deposits for lending is a major challenge for new banks like Revolut.
- 05Israel lacks statutory deposit insurance, potentially hindering new bank trust.
- 06A 2021 reform only slightly increased the annual bank customer switching rate.
Established Israeli banks generate most revenue from interest, while Revolut's model relies on fees. Attracting deposits for lending remains a significant challenge for new entrants, potentially increasing their operational costs. While regulatory efforts aim to boost competition, structural issues like the absence of deposit insurance and low customer switching rates persist.
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