Background on the payments market and the Bank of Israel’s position
The advanced payments market has undergone significant changes recently in general, and in the digital wallets field in particular. These developments include the offering of innovative payment services by existing and new participants. Among these, Bank Hapoalim has announced its intention to launch a digital wallet on the infrastructure of the Bit payment application; Bank Discount has announced its intention to launch a digital wallet, subject to the necessary approvals, in conjunction with Shufersal on the Paybox application infrastructure; Bank Leumi, Max, Isracard, and CAL have launched digital wallets for their customers; various retailers are also acting to provide their customers with additional advanced payment options; and global technology companies are expected to launch digital wallets for the Israeli public. These initiatives have been made possible thanks partly to a process led by the Bank of Israel, together with all the participants in the market, to implement the EMV standard at merchant terminals in the past year, which enables NFC (contactless) payments and payments through digital wallets, among other things.
The Bank of Israel’s policy regarding developments in the payments market is intended to create the infrastructure that will enable market participants to develop innovations in the payments field and to thereby expand the variety of options available to consumers and merchants in Israel to make payments in a way that will empower the customer’s experience, improve consumer well-being, and at the same time contribute to the encouragement and development of competition to benefit the public. This position includes a long-term view of the market and the development of means of payment in it.
The Bank of Israel has recently examined new initiatives in the payments market, including existing activity in the field of digital wallets and activity that is expected to develop in the near future. The examination included a review of what is being done abroad, in-depth queries and assessments of the development and characteristics of the digital wallet market structure in Israel, and meetings and discussions with various interested parties, both public agencies and relevant business entities.
One of the significant issues regarding the development of the payments market, and by extension developments in the financial market, has to do with the transfer and accumulation of information by entities in the payment transaction chain due to the customer’s financial activity, and the uses made of such information. This is a complex issue, the limits of which are beyond the financial uses and their effects. The Bank of Israel plans to examine this issue together with the other relevant bodies, and if necessary, to advance regulation on the matter.
In view of the examination that was made, and based on the stated policy, the Bank of Israel formulated a position according to which such initiatives can encourage competition, develop the world of payments, and bring value to the Israeli customer, and as such, should not be delayed, provided that at this stage of developments in the payments market:
1. The information gathered within the digital wallets shall not be used to provide financial services or sell other financial products to customers with payment cards that were issued for them by issuers that are not the providers of the wallet—until all aspects of this issue have been examined;
2. Open wallets shall, within a short time, be able to hold multiple cards from various issuers, so that customers will be able to use a number of cards at their choice easily and conveniently;
3. The restriction imposed on the two largest banks in the Increasing Competition and Reducing Concentration in the Banking System Law regarding facilities on credit cards applies to credit cards issued or that will be issued as part of cooperative ventures in which the two largest banks are involved, whether through cards designated for use in digital wallets or through other cards, unless the Bank of Israel announces, at the end of the examination, that such cooperative ventures are not defined as a joint issuance over which the restriction applies.
The Bank of Israel will continue to monitor developments in this area together with its activity to lead and advance innovation and efficiency in the area of advanced payments, and if necessary it will work toward the appropriate regulation.