Israel’s first fully digital bank, One Zero Digital Bank Ltd., recently announced the suspension of its international expansion plans, particularly its anticipated launch in Italy. This significant shift in strategy was precipitated by the war between Israel and the Hamas militant group in Gaza, a conflict that has cast a long shadow over Israel’s economic and corporate landscape. Established by Israeli tech entrepreneur Amnon Shashua, One Zero Digital Bank’s plans for overseas growth had initially been seen as a bold move, seeking to revolutionize banking with a digital-first approach. However, the impact of the ongoing conflict, combined with an uncertain global geopolitical environment, has forced the bank to reassess and recalibrate its objectives in 2024.
The decision to delay these international plans, which included a partnership with Italy’s Banca Generali to create a new digital bank, was made to address concerns about the uncertain security situation in Israel. The bank’s CEO, Gal Bar Dea, expressed this in a letter to employees, acknowledging the broader challenges posed by the conflict. He emphasized the bank’s need to pause global expansion until stability is restored. This move also included laying off approximately 6% of the bank’s workforce—about 20 employees out of its 350—highlighting the immediate need to streamline operations in a volatile economic climate. The delay in launching operations in Italy, in particular, is emblematic of the broader difficulty Israeli firms face in navigating not only local instability but also the global ramifications of the conflict.
Founded in 2019, One Zero was the first new bank in Israel in over 40 years, representing a critical milestone in the country’s financial sector. Its founder, Amnon Shashua, is renowned for his work with Mobileye, a pioneer in autonomous driving technologies and a subsidiary of Intel. Shashua’s reputation in the tech world gave One Zero significant credibility, and the bank quickly became a key player in Israel’s burgeoning digital finance space. The bank’s growth trajectory was rapid. As of early 2024, the bank was lauded for developing cutting-edge financial technology that enabled seamless integration across multiple languages and currencies, underscoring its readiness for global expansion.
Despite the setback in Italy, One Zero’s vision remains intact. Bar Dea noted that the joint venture with Banca Generali is still a key part of the bank’s long-term strategy, and the groundwork laid for entry into the European market is not wasted. However, the pause is essential in ensuring the bank’s future global ventures are launched from a position of strength, especially in such an unstable environment. Bar Dea reaffirmed the bank’s commitment to the expansion, expressing hope for the continuation of these plans once the geopolitical situation stabilizes.
In the meantime, One Zero’s focus has returned to its core market: Israel. The bank is prioritizing profitability and sustainability, aiming to reach financial self-sufficiency by the end of 2025. Given the rapidly changing dynamics of the Israeli economy in 2024, this is a prudent move. Israel’s banking sector is dominated by five large banks, and One Zero’s entry into the market as an independent digital entity has been seen as both disruptive and promising. Since receiving its license from the Bank of Israel in 2019, One Zero has leveraged its digital platform to offer consumers a range of services that challenge traditional banking models.
Even as its global aspirations are delayed, One Zero’s performance in the domestic market remains robust. By mid-2024, the bank’s revenues had grown by 150% compared to the same period in 2023, signaling its ability to navigate tough economic conditions. While the broader global financial environment has been marked by inflationary pressures and concerns over rising interest rates, One Zero’s unique model, which focuses heavily on digital services and subscription-based offerings, has allowed it to maintain a competitive edge. Subscription fees, trading fees, and foreign currency transactions accounted for a fivefold increase in non-interest income during the first half of 2024. Furthermore, the bank’s loan portfolio expanded by 75% to NIS 312 million ($83 million), and deposits from the public surged by 62% to NIS 2.34 billion during the same period.
One Zero’s rapid growth underscores the potential for digital banks to thrive, even in traditional markets like Israel. However, the geopolitical reality presents significant challenges. The war with Hamas, and the broader regional instability, complicate any attempts at global expansion. For many Israeli businesses, the current environment has made long-term strategic planning difficult. One Zero’s decision to postpone its plans for Italy reflects a broader trend in which Israeli companies are scaling back their international operations due to war-related uncertainty. In such a context, the bank’s leadership team, including CEO Gal Bar Dea, founder Amnon Shashua, and Chairman Shuki Oren, has made a pragmatic choice to consolidate their efforts at home before venturing abroad.
While the economic impact of the conflict is still unfolding, it is clear that Israeli companies are grappling with a host of challenges. The banking sector, in particular, has been hit hard, with traditional banks facing liquidity concerns and tech-driven institutions like One Zero facing both operational and strategic obstacles. Despite these challenges, One Zero’s ability to continue its growth trajectory domestically suggests that the bank is well-positioned to weather the current storm. Its decision to focus on profitability by the end of 2025 is in line with the broader trend among Israeli startups and tech firms to prioritize sustainable growth over aggressive expansion in uncertain times.
Looking ahead, the fate of One Zero’s international expansion will depend largely on how the geopolitical situation evolves. Should there be a return to stability, the bank’s plans to launch in Italy could resume as early as 2025. Until then, the bank’s leadership remains focused on maintaining its competitive edge in Israel’s financial sector, where it continues to innovate and challenge traditional banking norms. The decision to delay international expansion is a calculated one, aimed at preserving the bank’s long-term prospects while addressing the immediate concerns raised by a volatile security environment.
The global banking landscape, meanwhile, is also shifting, with more financial institutions embracing digital-first models. One Zero’s attempt to break into the European market, particularly in partnership with a well-established institution like Banca Generali, reflects the growing trend of digital banking across the globe. However, the current geopolitical climate has underscored the fragility of such expansion efforts, particularly for companies operating out of regions experiencing conflict. As of 2024, the ongoing war in Israel has not only delayed One Zero’s plans but has also raised broader questions about the future of Israeli tech firms in the global market.
In conclusion, One Zero Digital Bank’s decision to pause its expansion plans in Italy is a strategic move forced by external circumstances beyond its control. While the war with Hamas has created a challenging environment for Israeli businesses, One Zero remains committed to its long-term vision. Its performance in the Israeli market is a testament to its resilience and potential, and its leadership remains hopeful that peace and stability will allow for a resumption of global expansion in the near future. As the bank continues to innovate and grow domestically, its ability to adapt to changing conditions will be critical in determining its future success both at home and abroad.
