The FinTech industry has weathered two challenging years marked by inflation, rising interest rates, and reduced investor confidence. But as we enter 2025, a transformative resurgence is underway. A confluence of macroeconomic shifts, expectations for regulatory easing, web 3.0 resurgence, and AI-driven innovation is turning the page on FinTech Winter, promising a defining year for the sector.
The coming year promises to be a defining moment for the sector both globally and within Israel.
In the following report, we dive into the major trends driving FinTech’s public and private markets, with a special focus on Israel’s resilient FinTech ecosystem.
Israel’s FinTech Sector – The Comeback Year
In the past year, Israeli FinTech funding has shown relative resilience, with signs of stability and the ability to weather market headwinds and position itself as a global leader in innovation.
• Amid global economic shifts, Israeli FinTech funding dropped sharply from $6.4 billion across 216 deals in 2021 to $1.1 billion with 81 deals in 2024. Despite this decline, the sector demonstrated relative resilience, with a 31% decrease compared to a 39% global drop. Notably, overall VC funding in Israel fell by 35%, in stark contrast to a 12% global increase.
• Despite an overall decline in funding, FinTech remains a cornerstone of Israel’s tech ecosystem, holding its position as the second-largest category, accounting for 12% of the total capital raised in Israel, and trailing only cybersecurity, which dominated with an unprecedented 39% share.
• At the early stage, RiskTech has emerged as the dominant category, accounting for 35% of early-stage funding. Early-stage Crypto and Web 3.0 investments are also back, consisting 23% of overall early-stage FinTech investments in 2024.
• FinTechs dominate Israel’s highest-valued private tech companies, making up nearly half of the top. Seven of Israel’s top 15 private tech companies are FinTechs, including Rapyd, Deel, and Tipalti.
• Israeli FinTechs are driven by in-organic growth – strategically positioning themselves for long-term leadership through acquisitions. Deel leads the charge with seven acquisitions, followed closely by eToro with five acquisitions and Rapyd with four acquisitions, including Pay U, which was acquired for $610M.
• IPO readiness – with impressive valuations and a strong focus on scaling, Israeli FinTechs are entering a new phase of rapid maturity. Israel’s current public FinTechs raised $267 million pre-IPO, took a median of eight years to go public, and had 565 employees at IPO. In contrast, today’s private FinTechs have raised $565 million to date, have a median operational span of nine years and a workforce of 830 employees.
What’s Next for FinTech: Spring is Coming
With FinTech showing strong signs of recovery, 2025 will be a year of renewed momentum.
• Interest Rates on the Decline: Although the decrease is occurring slower than projected, rates are expected to fall from 5.4% in 2024 to 4% by the end of 2025, and borrowing costs will ease, boosting consumer spending and venture activity. This marks a major shift in FinTech growth
• Regulatory Easing on the Horizon: The Trump administration is shifting towards more lenient antitrust enforcement and a pro-business stance, particularly in the financial technology sector. This anticipated regulatory easing is expected to stimulate mergers and acquisitions, fostering innovation and consolidation within the industry. Additionally, the administration is considering reducing capital and liquidity requirements for banks, which could further encourage fintech innovation and expansion.
• Web 3.0 Resurgence: Bitcoin’s recent surge past $100,000, coupled with increased institutional allocations and advancements in blockchain infrastructure, is driving a significant resurgence in Web 3.0 adoption. Financial services players are increasingly prioritizing blockchain-based payment rails to enhance efficiency, reduce costs, and improve transaction transparency, recognizing their potential to revolutionize financial operations.
• AI Revolution: Much like the internet redefined digital banking in the 2000s, AI is ushering in a new era for FinTech. Yet, only 7% of financial firms currently leverage AI at scale. This gap presents an enormous opportunity for innovators to lead with AI-driven fraud detection, risk management, and hyper-personalized financial products.
Based on these trends, we believe that 2025 isn’t just about a recovery but a reinvention. AI will disrupt traditional banking, embedded finance will redefine customer experiences, and vertical FinTech will revolutionize industries like healthcare, travel, and real estate.
If you’re doing something in the space, we’d like to hear from you: alexs@viola.vc