Israel digital bank One Zero, controlled by Amnon Shashua, and led by CEO Gal Bar Dea, has reported financial results for its first full year of operations in 2023. The bank lost NIS 357 million last year after losing NIS 263 million in 2022. Since the bank was founded in 2019, One Zero has lost NIs 803 million.
The bank is financed by capital raised from shareholders amounting to NIS 960 million, with Shashua holding a 63% stake in the digital bank. The financial report shows that the bank's equity at the end of 2023 was NIS 91 million and the balance sheet totaled more than NIS 2 billion.
The bank's revenue in 2023 was NIS 41.6 million, of which NIS 27.4 million was income in interest income (compared with NIS 3 million in 2022) and NIS 14.3 million shekels stemming mainly from subscription fees (the bank's revenue model). One Zero stated that the average annual revenue per customer (ARPU) in 2023 was NIS 654, and according to the bank, it is "significantly higher" compared with other digital banks worldwide in their initial years of operation.
The number of customers at the bank rose to 100,000 last year. One Zero did hope to attract more customers, but Bar Dea says, "It was a challenging year." 40% are customers who pay subscription fees (about NIS 50 per month), 10% are defined as founders and are therefore exempt from payments, 25% produce income which is not a subscription fee, and another 25% have little or no activity at all.
Surprisingly about 25% of the money managed by the bank - about NIS 498 million - are in accounts bearing no interest, even though the bank boasts that it pays higher interest than Israel's big banks. The average account at One Zero has NIS 18,000, which means that most customers are not transferring all their money to the bank and are managing accounts in other banks.
The bank expects to be profitable by the end of 2025, while at the same time expanding overseas, to Italy in the first stage. In an investor presentation last summer, One Zero said it hoped to be profitable by the end of 2024. Bar Dea told "Globes" that the bank is moving forward with its plans and that contrary to previous predictions that to reach profitability it would need 250,000 customers, it now estimates that the number is around 200,000, "Because the income from each customer is higher than we thought. If we continue like this and increase activity we are on the road to success."
One Zero says that one in every three new bank accounts is opened with it. As of June 2023 there were 7.5 million bank accounts in Israel the bank held 1.2% of the market. 200,000 new accounts were opened in Israel last year of which more than 60,000 were with One Zero. Bar Dea said, "If you were to tell me that we will reach 8% within a decade I would take that now. If together with other players we will reach 30% that would be a bombshell in the banking market."
However, he adds, "Banking is not the mobile phone market and there are obstacles beyond the psychological obstacles. We need patience over time. If we do this then we will become profitable within two years and start standing on our own feet."
As reported by "Globes", just before the war broke out last October the bank was about to raise $100 million but the war shuffled the deck and the fund raising did not take place. One Zero has burnt through large amounts of money and the question is whether it will be able to continue raising the money it needs for operations in the coming years.
Bar Dea responds resolutely that it can points out that at the beginning of this year the existing investors put another NIS 88 million into the bank. He says, "We are blessed with investors who absolutely back us up to profitability, every time the bank needs money the existing investors, led by Amnon (Shashua) back us, including from China, Japan and Europe. They know the data and like the growth edge."
As for plans to bring new investors into the bank, he says, "Now the geopolitical situation is complex and since we are a bank that operates in the local market, we are exposed to the situation in Israel and if there is an event in the north it will have an impact. It is more realistic to raise money from new investors when there is certainty."
The report shows that Bar Dea earned NIS 2.05 million in 2023, similar to the salary he received in 2022. This is only 50% of the salary in the big banks, but the scope of activity is much smaller.
Published by Globes, Israel business news - en.globes.co.il - on March 27, 2024.
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