Irit Mendelson, Director of the Accounting, Payment and Settlement Systems Department, spoke at the conference of the Association of Israeli Chambers of Commerce, held at the Tel Aviv Stock Exchange.  She presented the Bank of Israel’s activity in the area of payment systems concerning innovations in means of payment in general and reduction of the use of paper-based means of payment in particular, against the background of the Cash Law coming into effect.  The Bank’s public information and implementation work is in cooperation with the Israel Tax Authority, which is entrusted with enforcement of the Law.  Among other things, Ms. Mendelson revealed the new check format that will be put into circulation during the year.

 

The Bank of Israel is taking a number of actions to encourage the use of lower-risk advanced electronic means of payment and the implementation of the sections of the Cash Law that relate to checks.  As such, the Bank has acted to update the standard for check printing in Israel, such that on checks that are not initially printed with limited transferability (without the limitation of “to the beneficiary only” printed on the check), the back of the check will contain a table providing the payer or receiver of the check with information they will need to note alongside it.


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The law’s restrictions regarding check transactions[1]:

 

Transactions between private individuals—A person who is not a business shall not receive checks totaling more than NIS 5,000, for any purpose, if the name of the receiver of the payment does not appear on the checks.  The prohibition applies to both the writer of the check and the receiver of the check.

 

Transactions between businesses—A business cannot give or receive checks of any amount, for any purpose, if the name of the receiver of the payment does not appear on the checks.  The prohibition applies to both the writer of the check, whether the writer is a business or not, and to the receiver of the check.

 

Transfer of checks—It is prohibited to transfer checks or to receive transferred checks, if the name and ID number of the transferring party does not appear on the check.

 

A post-dated check deposited with the bank for safe-keeping before January 7, 2019 shall be considered as a check deposited before the law came into effect, and the restrictions shall not apply to it.

 

The change in the uniform check standard—in relation to the back of the check—is intended to provide a response to the limitations on transferring checks in accordance with the Reducing the Use of Cash Law:

 

Only one transfer is permitted between private customers / businesses—for amounts above NIS 10,000, where the transferee and his ID number must be listed on the back of the check.  A check may be transferred more than once if on the second transfer the check was transferred to a banking corporation, the Postal Bank, or a license holder for the provision of deposit and credit services, for the purpose of being paid out.[2]

 

In recent years, the Bank of Israel has led and advanced many issues in the payments system, including the field of debit cards—in order to allow for an alternative to the use of anonymous paper-based means of payment, the use of which is limited by the Reducing the Use of Cash Law.  The Bank of Israel is acting to remove barriers and to create the infrastructure that will enable transactions to be made through debit or deferred debit (use of a combined card) while granting the customer control over choosing the type of transaction.

 

As such, we have witnessed a marked increase in the use of immediate debit cards in recent years—an increase of about 30 percent in both the number of transactions and the cumulative annual amounts between 2016 and 2017.

 

Implementation of the EMV standard, a standard that enables smart payments at merchants, which, in addition to being a secure standard for making transactions through payment cards, will provide an infrastructure for smart proximity payments.

 

The Bank of Israel will continue advancing reforms in the payments system, and is taking further infrastructure measures, the effect of which will be felt in the coming years.  These include the advancement of contactless payments, where technology enables payments by holding a payment card / smart phone / smart watch / electronic bracelet, and so forth against a reader in order to make the payment.  Examples of this exist in the Android Pay, Samsung Pay, and Apple Pay services.


[1] For more information on the Cash Law, see the document from the Knesset Research and Information Center.

[2] Following the transfer to the banking corporation, the Postal Bank or a license holder for the provision of deposit and credit services, the check may be transferred from the supervised financial institution to another supervised financial institution one time only.​