To (Hebrew) the Interim Report
The Bank of Israel continues to implement recommendations in the payment card market. These implementation of these recommendations is expected to allow the entry of new participants and thus to increase competition in the market, to encourage the use of electronic means of payment by the general public, to increase the market’s efficiency and to bolster its stability. Within this framework, the Bank of Israel is publishing an interim report on the issue of the credit card transaction chain. The report includes recommendations for achieving these goals
Due to the recommendations of the Committee to Examine Reducing the Use of Cash in Israel’s Economy (the Locker Report), and of the Cost of Living Cabinet, which indicated the need to promote setting up an additional switch for processing payment card transactions, the Bank of Israel established a team to examine the issue, headed by Noa Sheshinski, the Head of the Payment Systems Oversight Unit. The team conducted an extensive examination of all the links in the transaction processing chain (including a study of the switch).
· The processing of a payment card transaction is a complex process, which incorporates many participants and sub-processes. One component along the chain cannot be considered without taking into account the other factors along the entire chain, and examining the effect of each one of them.
· In Israel, under the model that has developed, the Shva (Automated Banking Services Ltd.) company provides a large and varied share of payment card services, including supplying the switch infrastructure.
The team recommends taking measures to remove the existing barriers in the market, and allowing the entry of new participants. Following are the main points of the recommendations:
· Expanding the activity and participation of the National Payments Council to additional relevant entities, in accordance with the World Bank’s model. The Council is an advisory body that outlines strategy through collaboration with involved entities and with optimal transparency.
· Establishing a Payment Card Committee that will regulate and define the executing of payment card transactions in a manner that increases competition and efficiency while maintaining stability and safety.
· Regulating the principles and rules of developing the protocol and its use. The Payment Card Committee will regulate the principles and rules for developing the protocol and its use, and ensure the protocol’s transparency and accessibility to all relevant entities.
· Modular implementation of the protocol, which will allow choosing and implementing the terminal’s uses (functionalities) in accordance with users’ needs.
· Support by the terminals of numerous applications and of contactless transactions, which will allow the development of advanced means of payment and other routing measures.
· Execution of debit card transactions on the ATM switch should not be obligatory, as there is doubtful contribution from adding this option.
· Establishing a new central clearing interface for transactions on the ATM switch in order to simplify the clearing process, reduce costs and make it easier for a new participant to join the system.
The Director of the Accounting, Payment and Settlement Systems Department, Irit Mendelson, said, “The implementation of the report’s recommendations will allow the entry of new participants and increase the competition in the payment card sector, while increasing the stability and efficiency of the payments system, and will support these processes. The expected changes as result of the recommended processes will also allow the development of advanced means of payment.”
The interim report (Hebrew version only) is attached to this notice. The public is invited to submit its comments on the draft by September 7, 2015.
Bank of Israel contact: Steve Lev: email@example.com