Enhanced competition in the merchant acquiring market: The Bank of Israel grants a license to a new acquirer today
Supervisor of Banks Dr. Hedva Ber said, “We have declared our intention to enhance competition in the merchant acquiring market, and already in November 2015 we markedly eased the barriers to entry in the market—we established a simple and supportive process for receiving a license, we sharply lowered the capital requirements for a new acquirer, and more. As a consequence of these steps, after many years in which only three companies operated in the market, a new player is joining the merchant acquiring market today. The granting of a license to TRANZILA reflects a major step in promoting the goal of increasing the competition in the means of payment sector and in the credit market, for the benefit of small and medium businesses and households. We assess that the entrance of a fourth company to the market will create an alternative for companies and will lead to increased competition, which will be reflected in the lowering of acquiring fees paid by merchants, improved service, a higher level of innovation, and later on, in accordance with the business plan submitted by the company, to enhanced competition in issuing payment cards. I urge merchants to actively compare the various price offers, to negotiate, and to switch between acquirers, in order to reduce the costs of acquiring.”
In 2016, the merchant acquiring market in Israel was approximately NIS 270 billion, and consisted of the three credit card companies—Isracard, Cal (Cartisey Ashrai L’Yisrael-Israel Credit Cards), and Leumi Card. Recently, the Banking Supervision Department took numerous actions to remove barriers to entry, and to make the entrance of new competitors possible. These actions made possible a rapid process for granting an acquirer license to a new company, so that within approximately three months from the receipt of the complete application from the company, the Bank of Israel approved the granting of the license. The removal of the barriers included:
· Making the licensing process shorter and more efficient, by providing regulatory certainty with regard to granting a license before a significant investment (primarily in the areas of technology and workforce recruitment) was made, easing both the connection to the local payment card system (Shva) and the receiving of the licenses from international credit card schemes;
· Notable leniency in minimum capital requirements (starting capital of only NIS 1 million is required of a new acquirer)
· Notable regulatory leniencies for entities that don’t have a significant impact on the stability of the financial system and the payment system. The leniencies were granted in the areas of corporate governance, risk management, and other regulations.
The Banking Supervision Department works closely alongside the companies that are interested in receiving a license, and helped TRANZILA throughout the entire process, until the license was granted. Beyond helping the company, this enabled the Banking Supervision Department to precisely formulate the leniencies required by a company to begin operations.