The Protocol Committee, which was established to implement the decisions of the Payment Card Committee[1], has through an accelerated process completed the protocol adjustments[2] necessary for modular implementation, and any party along the transaction chain may now obtain merchant acquiring services in line with its needs and pay only for those services. This is especially important for small businesses, some of which have until now not honored payment cards due to the cost of setting up and operating a point of sale.
Until now, every point of sale made it possible to carry out all types of payment card transactions, even if the business had no need for some or even most of them. These points of sale cost the business a few hundred shekels, and some of the cost was due to the fact that they enable all types of transactions. Moreover, the need to support all types of transactions created an entry barrier for other parties along the payment card transaction chain.
Now, the “Ashrait” protocol supports modular implementation. It enables parties operating along the chain to choose and implement components, according to their needs, whether at a point of sale or on a remote server (on the premises of the issuer, the acquirer or the processor), and to pay only for those components. This measure was completed just prior to the transition to the EMV standard, and all parties operating along the chain have the opportunity to take advantage of the change in order lower costs and adapt the products and services currently offered to their needs. Businesses will be able to implement the change in new points of sale or on terminals that they upgrade. The existing terminals will continue to support all settlement transactions.
The following are examples of new possibilities due to the change:
v Businesses and acquirers will be able to support only immediate debit transactions
o With no need to support installment transactions, customer clubs, card not present transactions, credit transactions, and so forth.
v Manufacturers will be able to develop terminals in dedicated formats for business and for specific activity segments
o Terminals that support only fuel transactions, with no payment functions that are not relevant for such transactions.
o Terminals that support only card not present transactions or only card present transactions.
o Dedicated terminals for the hotels segment, such as terminals that support foreign currency transactions and risk management appropriate for the types of transactions in the segment.
v Processors will be able to partially or fully support types of cards, brands and value added services
o New processors will be able to support some of the brands or some of the types of cards issued, and offer new value added services to businesses, acquirers and issuers.
v Issuers will be able to choose the method of customer verification at the point of sale
o Verification through a PIN, an ID number, entering identifying data, customer’s address, and more.
Director of the Accounting, Payment and Settlement Systems Department Irit Mendelson said, “This measure completes the removal of a significant barrier that existed in the market, and advances the entire market toward informed competition that will benefit all parties along the transaction chain, particularly businesses. The Bank of Israel will continue monitoring developments in the market, and will take additional steps as necessary to advance competition in the settlement market.”
[1] The Protocol Committee is comprised of representatives of the acquirers, issuers, processors and switches that operate throughout the payment card transaction chain in Israel, as well as additional interested parties in the protocol (such as Payment Gateway service providers, manufacturers, distributors, and international organizations).
[2] On May 9, 2017, the Bank of Israel published a document entitled “Required and Optional Components of the Protocol”, which outlines the protocol implementation policy in the payment card market.