Payment Systems
Payment and Settlement Systems
One of the Bank of Israel’s primary functions is “to regulate the payment and settlement systems in the economy, with the aim of ensuring their efficiency and stability”.
The payment systems play a key role in the economy’s smooth and continuous operation, and they are an essential part of the economic and financial infrastructure of modern economies. The stable, secure, effective, efficient, and competitive activity of the payment systems is essential to the economy and to maintaining monetary and financial stability, which is the central bank’s responsibility.
The Bank of Israel’s Payment and Settlement Systems Department is responsible for fulfilling this function. The Department operates the ZAHAV (real-time gross settlement) system and the Paper-Based (Checks) Clearinghouse, oversees the supervised means of payment and supervised payment systems, and sets out long-term strategy for the payments array.
Payment systems in Israel
What are payment systems? Payment systems are groups of rules, instruments, and procedures for the transfer and execution of payment orders between participants, including operators.
What is settlement? An action that releases liabilities between two or more parties, concerning the transfer of money, securities, or other financial assets.
What payment systems operate in Israel? There is a wide variety of payment systems in Israel, including high-value settlement systems and retail payment systems.
Payment systems operated by the Bank of Israel – ZAHAV and Paper-Based Clearinghouse
The ZAHAV system is used for the final transfer of large amounts in real time.
The Paper-Based Clearinghouse is intended to settle physical payment messages (checks and various debits and credits).
Supervision of payment services
The Bank of Israel’s function as the supervisor of payment systems is to ensure the efficiency and stability of the payment systems in Israel. It accomplishes this function through regulation, assessment, and examination of these systems.
These systems include both technological systems and general systems (schemas) that regulate the means of payment.
Supervised systems
Supervised systems are payment systems that the Governor believes are essential for the entire payment array in the economy, and with regard to which there is concern that improper, inefficient, or undependable activity would harm the economy.
The supervised payment systems currently operating in Israel are:
- ZAHAV (real-time gross settlement) operated by the Bank of Israel
- CLS, operated by the CLS Bank
- The Credits, Debits, and Transfers System operated by MASAV (Bank Settlement Center)
- The Payment Card Services system operated by SHVA (Automatic Bank Services)
- The ATM system operated by SHVA
Payment array policy
The Bank of Israel is required to formulate a long-term policy for the payments array. As part of this, the Department creates and establishes cooperative arrangements with both internal and external entities; defines and outlines the strategy for the payment and settlement array in Israel for the coming years; initiates recommendations for advancing reforms in the payment and settlement area while examining the needs and trends of both payment array participants and the general public using various means of payment; analyzes scenarios in order to conduct various policy processes and examine trends in the payments array; and studies, writes position papers, and conducts surveys in order to advance the payments array policy.