“In our set-up plan, we broke everything down into 14,000 small tasks. I really like challenges people say are impossible to achieve. On September 23, the change will begin with the Open Banking Reform and the Interbank Mobility Reform, and within 5-10 years, the industry’s three leading banks will look different.”
It’s hard not to get caught up in the energetic Scouts-style enthusiasm of Gal Bar Dea, CEO of the First Digital Bank, an ambitious enterprise owned by Amnon Shashua. Along with the enthusiasm, it is clear that Bar Dea comes from a very ambitious, achievement-oriented family. He is 41-years-old, married with two children, lives in the Tel Aviv neighborhood of Neve Tzedek, and he is the son of Strauss Group CEO Giora Bar Dea. His brother, Nir, is Deputy CEO at Bridgewater, the world’s largest hedge fund.
“I like to be in places where I can influence. We’re a family of Israeli Scout types. My father was the head of the Tel Aviv tribe and I coordinated the Kochav Yair tribe. I’m waiting until my son can become the leader of a tribe and wear the kerchief. It’s in our blood,” he says in his first interview with Calcalist.
The space housing the Digital Bank at 3 Aminadav Street in Tel Aviv is very non-hierarchical. Everyone sits in transparent rooms, or in an open space, which makes the new bank’s mission of shattering banking’s glass ceiling glaringly obvious. This is also reflected in the phrases that adorn the walls, which range from “Building a bank” all the way to a blackboard hanging on one wall where the workers are asked to write in dreams before the bank’s launch (such as “I’ll ride a unicorn,” “We’ll build everyone a smart assistant,” and “We’ll win the Eurovision again”).
“We don’t have a whole floor of executive suites. The idea is to sit together, with everything transparent and everything happening from now to now. Not presentations for two weeks from now – everything is completed in short cycles. At the speed we work at, there’s no room for hierarchies,” Bar Dea points out.
You’re speaking with the enthusiasm of an owner. Do you hold equity in the bank?
“I have options. All the workers are partners in this, everyone here has options. They work very, very hard. One of the things I like best is that the workers try to convert bonuses and salaries because they want to buy more options. They come to ask for them because they believe in this business.
“Today we have 200 workers who were recruited during the pandemic, many of them by way of the system known as ‘a friend brings a friend.’ Sometimes we have recruitment campaigns with bonuses. We have a team leader who brought in four people from his previous workplace. Every morning I and members of the management team sit with workers over coffee and check how we can help them. On Thursdays, everyone gets on Zoom and gives updates about what works and what doesn’t, what challenges them and what annoys them – it’s a culture where everyone knows everything. There are no secrets.”
It sounds like you snatched workers right from under the nose of other companies.
“Ultimately, there’s a talent war. When we started to work, I would sit in cafes and try to persuade people and recruit them for building a bank. They’d tell me, ‘Nah, let’s build a startup together.’ Have you seen the movie Ocean’s Eleven? For half a year, I marked out the best talents; in some cases, I had to speak with their spouses too. You’re asking people to leave their jobs at a time when their careers are blossoming beautifully; moving over to a new business is not an obvious step.
“There are labor laws, everything has to proceed according to a cooling-off period – but I need the best people in Israel. Establishing a bank is a formative event, and you have to have the best of the best.”
“The startup that failed? It was too early”
Bar Dea was raised in Even Yehuda, a town in central Israel. “I grew up in a competitive household, my father was the CEO of Elite, and there were a lot of aspirations to excellence.
“When I was 17, my father took me to Columbia University in New York, walked me around and told me: ‘No pressure.’ For years, I served as an officer in Unit 8200. I earned my bachelor’s degree in Business Administration and Economics at Tel Aviv University.
“Then came the shot from the gun that was laid on the table in the first act, and I went off to Columbia to get my MBA. Three days after I began my studies in August 2008, the world caved in. We stood in front of the screens and watched how workers at Lehman Brothers left the building carrying cartons and crying. Everything plunged by dozens of percentage points, and people lost trust in their banks. I sat in the lecture hall and told myself: I know what I want to do. To build a bank that’s fair and transparent, a bank that people will want to move to.”
You did that with Bink Financial Innovation, a startup that failed.
“In 2011, I came back to Israel full of faith that I would establish the first interactive bank in Israel. We built a business model of a bank that uses the license of an existing bank. We developed technology, recruited angel investors, but it was too early. The regulators weren’t willing to listen to us, and the word ‘fintech’ hardly existed. I burned through half a million dollars in two years and realized that it wasn’t going to work.
“And then I was approached by Pepper, the digital banking arm of Bank Leumi. It was a wonderful period of four years when I learned a lot, mainly that it’s impossible to disrupt from within an existing organization.”
What do you mean? That it’s impossible to establish a digital bank within a traditional bank?
“It doesn’t matter how much desire and money you have when there are supporting walls, limitations – it’s not like buying a sand-filled lot and then building a house around your customer. Tesla is a company that rose up from nothing. It’s not a matter of desire or money. To disrupt a market, to introduce competition, to generate value – history proves that only an organization that’s built from the ground up can do that. Ford Motors and Bank Leumi have money and data, plus amazing people, conference rooms – but somehow in the end they just don’t succeed. You have to build from scratch. An existing organization has a history, an organizational memory, departments that are evaluated according to differing standards. There’s a technology that needs to be beefed up and it’s not always possible to change the core systems of banks that are decades old.”
What’s bad about Pepper and similar initiatives? Today every bank has a digital interface.
“Pepper is an excellent app in Leumi’s portfolio, but at the end of the day, customers are looking for a bank that’s a complete alternative to their current bank. Customers have complex needs, beyond resolving a specific problem for someone who wants to open a youth account for a 16-year-old. You need to have a bank guarantee for apartment rentals; you need financial planning, investments, car loans. Discount Bank’s PayBox offers a terrific solution for when you need to collect money for a gift for the kindergarten teacher. Bit is excellent for paying for a Druze flatbread while you’re sightseeing. As applications in a bank’s portfolio, Pepper, Bit and PayBox provide an excellent solution for short-term needs. But financial life is more complicated than this when you have a budget to manage.”
Do you really think people will bring themselves to change their bank?
“In this realm, 2022 is going to be a year unlike any other we’ve seen until now. They’ve always talked about moving from one bank to another. Some surveys show that 40% of customers want to leave their current bank but claim they have no place to go. Next year, for the first time, they will have someplace to go. And we have the Interbank Mobility and Open Banking reforms to make it easy to do. Suddenly, there will be alternatives.”
Do young people today even have a concept of what a bank is? Loans come from the lending platform Blender, car loans come from an insurance company, installment payments from an application. Who needs a bank?
“About 50% of Israeli households are in overdraft, partly because people don’t know how to manage their money. You can be a professor, an economist, the greatest genius. But people get lost amid cash flow, current account, expenses, accounts, guarantees, checks, pension funds, investments. Their money is scattered around in a million places and no one is giving them guidance. We bring them glad tidings about prices: Today it costs NIS 2,000 a year to hold an account at Bank Hapoalim or Bank Leumi – with us, it will cost NIS 800.
“Bank Leumi’s fee chart lists 392 commission fees, and you don’t even see what you’re paying for. People don’t have the slightest idea how much their bank costs them. We’re living in a smokescreen of charges and expenses that we don’t see. Part of the banking system’s current business model is based on these knowledge gaps. You pay…