5.4.2005
 
Wider distribution of ATMs (automatic teller machines) in Israel
 
The Banking Supervision Department in the Bank of Israel announces that with the intention of introducing competition into the field of ATMs in Israel, banks and other entities requesting to do so will be permitted freely to install such machines and to charge a fee for the services provided by them. At the same time, in order to avoid any adverse effect on the current level of service and its price, banks will be required to install machines in the vicinity of all or nearly all of their branches, and the price charged should remain at its current level.
The number of ATMs in Israel is lower than that in the advanced economies, whereas the number of cash withdrawals by Israelis is no different from those carried out residents of those countries. The difference becomes more pronounced the greater the distance from the main conurbations, as the shortage of machines becomes even more evident. The reason appears to be the fact that the price for the service is government controlled, and the level of the fee is not high enough to justify a wider geographical distribution of machines in locations other than close to a branch of the bank. The cost of installing a machine close to a branch is lower and more worthwhile for the bank as it reduces the need to offer customers cash withdrawal facility via a clerk, so that nearly all bank branches have ATMs. Locating ATMs elsewhere, not close to a branch, involves additional costs such as the costs of transporting money and servicing and securing the machine, so that they are relatively sparsely distributed in Israel.
The Banking Supervision considers that the number of machines should be allowed to increase, even if this entails charging a higher fee for cash withdrawals from a machine that is not close to branch. Greater availability of machines would benefit the public, especially in relatively thinly populated outlying areas, where currently no facility for withdrawing cash exists.
The Supervisor of Banks has asked the Price Controller in the Ministry of Trade, Industry and Labor to remove the price control only on the fee charged for cash withdrawals from machines not in or close to a branch, while the fee for withdrawals from machines in or close to a branch will remain under control (the current fee for a withdrawal is zero, although it is subject to the 'line charge' of between NIS 1.21 and NIS 1.28 levied by the banks per entry in an account,). This step is intended to remove the economic barrier preventing banks wishing to do so from spreading the distribution of ATMs more widely. At the same time the Banking Supervision Department has instructed banks to ensure that every branch has an ATM on a wall accessible from outside the branch, except for exceptional cases where this is not possible, or where the contribution of an additional machine would be minimal.
As part of this new policy, the Supervisor of Banks has authorized Bank Discount to establish a joint company with Lipman Electronics Engineering to install ATMs in sites that are not bank branches. In addition, an arrangement has been made with Automated Banking Services Ltd. (ABS), which currently operates 116 ATMs located at nonbank sites. The arrangement allows ABS to charge a fee for cash withdrawals from some of its machines, while it increases the number and distribution of its machines available to the public so as not to impose a sweeping increase in the cost to the public of cash withdrawals from ATMs. The new arrangement will come into effect when the Price Controller has confirmed the removal of control over the fee for cash withdrawals from machines not in the vicinity of a branch.