The separation of the credit card companies gets underway
The agreement between Bank Leumi and Warburg Pincus was signed in July 2018 as part of the implementation of the Increasing Competition Law, which set out that the two credit card companies owned by the large banks—Leumi Card and IsraCard—would be separated from the parent banks. The objective of the law is to create two independent financial entities that will increase competition in financial services. The separation from Bank Leumi is getting underway about a year before the final date set out in the law.
Bank of Israel Governor Prof. Amir Yaron said, “After having made an in-depth examination of all aspects of the separation of Leumi Card from Bank Leumi and turning it into an independent financial entity, I have decided to grant the control permit to Warburg Pincus for the purchase of Leumi Card. The provision of the permit enables the separation of the company and turning it into an independent financial entity, with the objective of advancing the reform in the credit and payments market and introducing competition and financial innovation in this important industry. The entry of international financial entities, such as the firm that is purchasing the company, to the Israeli market is expected to bring know-how, experience, and new tools in the areas of finance and payments, and reflects trust in the development potential of the Israeli financial system. I expect that the new company will use the ability and information it has for the benefit of consumers, while increasing competition and innovation, with an emphasis on credit to small and micro businesses.”
Supervisor of Banks Dr. Hedva Ber said, “Today, a new independ ent financial entity was “born” in Israel, and we are proud of this. The Banking Supervision Department views the separation of the credit card companies as a lever for the advancement of competition in the fields of payments and retail credit, and has acted with vigor over the past two years to advance and enable the reform. Since the legislqation of the Advancement of Competition Law, there has been a significant decline in the settlement fees paid by small businesses, which shows the competitive pressure that has already been created in the market. The expected competition for retail customers has also led the banks to develop convenient payment applications that are inexpensive for customers. We are acting so that the public will continue to benefit from the competition that will develop through the separation of the credit card companies and other structural measures that the Bank of Israel is advancing.”