Review of the Promotion of an Immediate Payment Infrastructure in Israel’s Payment System
The Bank of Israel is publishing a paper today on the promotion of an immediate payments infrastructure in Israel. The paper includes a review of the need and emphases in establishing the infrastructure, as well as the additional steps that the Bank of Israel will focus on in order to enhance competition and efficiency in Israel’s payment system. The Bank of Israel supports the development of an immediate payments infrastructure that will make it possible to broaden the range of payment options in the payments system.
The infrastructure will make it possible to execute immediate payments directly from the customer’s account, so that the funds will be seen and will be available immediately for the beneficiary’s use within several seconds; transfer of payments between various electronic wallets, including person to person, person to business, and business to business. It will also make it possible to execute payments between institutions, including government ministries; transfer a request to pay between users; expand the services of transferring extensive information or files together with the payment—such as bill payments, providing the possibility to carry out payments vs. delivery, and to connect the immediate payments infrastructure in Israel to similar infrastructures worldwide, which will make cross-border payments possible.
Following are the main steps for promoting the integration of the immediate payments infrastructure in Israel:
1. November 2017, the Bank of Israel published a public consultation document in order to receive information on the establishment of an immediate clearing system in Israel. It included the main principles for setting up an immediate payment clearing infrastructure in Israel. The Bank received several responses to the public consultation document from various entities, some from Israel and some from abroad, focusing on 3 main categories: (a) development of an infrastructure for immediate clearing of payments, (b) development of services related to the infrastructure’s activity with an emphasis on developing a platform that will allow a gateway to the new infrasture; and (c) general reference to the issue.
2.Some of the recent reforms in the payments system and the publication of the public consultation document led various interested parties in the payments system to support the establishment of an immediate payments system as well as the examination of provision of various solutions along the immediate-payment transaction chain. The main development in the area is the initiative by Masav (Israel’s ACH) to implement and outline the specifications for an immediate payments solution based on the existing ACH infrastructure. This project is in advanced stages and the Bank of Israel is accompanying it in order to ensure that the service will be stable and efficient, will provide a response to market needs, and will be in accordance with international standards. The Bank of Israel guided the Masav system operator and participants to prepare to enable their customers to receive payments via the immediate payment service, no later than by the end of August 2020.
3. A comprehensive examination conducted by the Bank of Israel indicates that to the extent that the domestic system operator joins with an international entity with experience, it will allow an efficient integration of the immediate payments infrastructure in Israel’s payment system. This is due to the international experience, shortened timetables, implementation of international standards such as ISO 20022, and the future connection to the immediate payment infrastructure in the world for the execution of cross-border payments.
4.The Bank of Israel is examining additional steps to promote innovation and increased efficiency of the payments system in general and of immediate payments in particular. There is an emphasis on the following issues: cross-border payments; the need and the appropriate method for managing a central database/managing identities in the payment system in Israel; the need for a white label application (electronic payment wallet); regulation of the execution of payments at merchants, including the removal of barriers to conducting them digitally; and assistance with preparing to carry out digital payments in services provided by various government ministries.
5.The Bank of Israel is working diligently to provide access as well to the Masav system to nonbank entities who do not maintain an account at the Bank of Israel. This includes building models for direct and indirect access to the Masav system, and the issuance of guidance to system participants to establish rules for the participation by nonbank payment service providers. This guidance prohibits system participants from unreasonably refusing to represent payment service providers in the system and thus will enable credit card companies and other overseen entities to provide immediate clearing services to the public via digital wallets, payment applications, and more.
 Immediate payment is a means of payment in which the payment initiator is charged immediately for the amount of the payment, and the payment recipient is credited immediately with the amount of the payment. This enables the payment recipient to use the money credited to the account immediately—similar to payment via cash.