Fintech sector to continue recovery in 2026, Israeli venture firm says

JERUSALEM, Jan 27 (Reuters) - The ⁠global financial ⁠technology ‍sector will continue to mature in 2026 after recovering sharply in 2025 from a three-year downturn, Israeli ‍technology investment group Viola Ventures said in a report ​on Tuesday.

In its 2026 State of FinTech report, Viola said the sector ​was entering a new chapter with stronger founders and more durable business models.

"This environment will produce fewer companies, but better ones," Viola said, adding that ​Israeli fintech companies were "uniquely positioned to be overrepresented among them".

Israeli fintech companies raised about $1.4 billion in 2025, broadly steady ​compared with 2023 and 2024. In total, Israeli tech startups raised nearly $16 billion last ‌year.

But the value of merger and acquisition deals in Israeli fintech rose in 2025 to $5.8 billion ​from $1.2 billion in 2024, led by ⁠Xero's $3 billion purchase of Melio and Munich Re's $2.6 billion acquisition of Next Insurance.

"The recovery underway is ‌not a return to the excesses of the prior cycle, but the beginning of a more disciplined, more efficient, and more durable ecosystem ‌entering its next growth phase," said Viola, one of Israel's biggest venture ‌firms.

Viola in December raised $250 million in capital for two new funds to back the "next generation of Israeli startups".

Israel's tech sector, one of the largest ‍in the world, accounts for about 20% of GDP, 15% of jobs and more than half ⁠of Israeli exports.

Viola noted that fintech accounts for 10% of the tech workforce. The sector also includes 13 unicorns - startups valued at $1 billion or more - and 10 public fintech companies.

(Reporting by Steven Scheer. Editing by Mark Potter)

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