Opening the payment and settlement systems to customer loyalty clubs

The Bank of Israel is acting aggressively to advance efficiency and competition in the area of payments, and is encouraging new nonbank entities to gain access to the controlled payment systems.  As part of this, the Bank of Israel’s Supervisor of Payment Systems is enabling direct access to the SHVA payment card system for entities that are not engaged in interchange activities.

This includes entities that operate loyalty programs that operate on a CLP (Closed Loop Payments) model, in which one entity operates on both the issuance and settlement sides.  Such entities operate closed loyalty programs and issue cards to the customers, while also handling settlement and accounting vis-à-vis businesses that honor the cards.  Until now, each CLP entity was required to maintain an independent settlement infrastructure and to deploy it at merchants joining the club.  From now on, the programs will be able to connect to the SHVA payment card system, and thus to settle club cards through existing terminals at the merchants’ place of business.

As a result of the change, consumer programs will be able to offer the use of consumer benefits at many more businesses and with greater accessibility, which should lead to the utilization of the various benefits more rapidly and more completely.  This process will help lower the cost of living and assist in the more efficient utilization of benefits.

To view the press release on this topic, click here.