Households and small businesses will be able to move between banks and to open new accounts without having to come to a branch and without restrictions on their new accounts.
Customers will be able to remotely join an online account at their existing bank, via the Internet or their mobile device, and obtain all services without having to come to the branch.
The banks will be able to offer their household and small business customers aggregated information from all financial institutions with which they manage accounts (other banks, credit card companies, and nonbank financial institutions). This information, on total loans, deposits and savings plans, interest and fee payments, and so forth, will enable customers to better control the state of their finances and obtain better competing offers.
The directive creates infrastructure that will enable the establishment of a new digital bank with no branches, by a banking corporation or a nonbank corporation.
The Banking Supervision Department today sent the banks a new draft Proper Conduct of Banking Business Directive on “Online Banking”, as well as a draft amendment to directives that are complementary to the new Directive, which expand the variety of agreements that can be approved over the Internet, and the sending of notices and letters online. The draft will be discussed with the banks during the coming period, and will be revised as necessary.
Supervisor of Banks Dr. Hedva Ber stated: “Our new policy will enable the strengthening of the digital revolution in the banking system over the next few years, which will benefit households and small businesses in the economy. We have removed many impediments in the field of online banking in order to enable increased convenience for customers in consumer banking services without needing to come to a bank branch; an expanded variety of services customers will receive from banks’ increased transparency and customer ability to compare; easier transition between banks; and lower prices for banking services. In addition, the move to digital banking will enable the banks to continue streamlining, thereby enabling them to make competitive offers to their customers.
“It is clear to the Banking Supervision Department that we are in a transition period between traditional banking and digital banking. Therefore, customers who wish to continue receiving all or some banking services at the branches will be able to do so, and we will ensure that this will remain possible. At the same time, the innovations in the financial technology (fintech) field make it possible today for those who are interested to receive much more, all without physically entering a branch. I believe that the digital revolution that has been influencing the lives of most people in recent years in a variety of ways will significantly change the face of banking in favor of the customers. The policy declared today by the Banking Supervision Department will make that possible.”
The new Directive and complementary amendments will enable the banks to offer the full variety of banking services without the customer having to visit a branch, almost without paper, and without needing to send faxes to the bank. A household or small business customer who so wishes can change banks and open a new account remotely without coming to a branch and without the restrictions that were in place until now, or remotely open an online account at his existing bank via the Internet or mobile device. Such a customer can conduct banking transactions at any time throughout the week without restriction, via the Internet, mobile device, ATMs, or the bank’s call centers. Some of the contact with the bank will be possible by sending electronic mail between the bank and the customer, and via text messages to the customer’s mobile phone. High-risk activities will be conducted through the use of stronger means of identification and verification. In addition, customers will be able to obtain a new service from the bank consisting of a single aggregated report of all of their information from all of the financial institutions with which they have an account, thereby better controlling their financial status, the fees and interest they pay, and even improve their financial state. Customers will be able to receive various warnings by electronic mail or to their mobile device, such as text messages notifying them they have exceeded their line of credit, and so forth.
The new draft Directive on Online Banking, which amends a main chapter in an existing Proper Conduct of Banking Business directive on “Information Technology Management” (Directive 357), defines the following changes, inter alia:
(a) Moving between banks and opening a new account—The directive enables a customer to remotely move between banks and open a new account without physically coming to a branch, without various restrictions such as quantitative restrictions on transactions and balances that were imposed on an account opened in this manner until now.
(b) Joining online banking services at an existing bank—A customer who holds an account at a certain bank and is interested in joining various online banking channels to obtain all levels of service online (information, transactions and other activities) at that bank will be able to do so online. Until now, the customer was required to sign agreements to join such services at the branch.
(c) Online agreements—The types of agreements regarding which the customer’s signature at the branch is not required will be expanded. For instance, the customer will be able to approve a credit provision agreement, a securities deposit custodial agreement, and others, via the bank’s website. In those cases that are not common or routine in the customer’s day-to-day activities but still require a written signature by law, the bank will be able to send a representative to the customer.
(d) Transfers and payments to a third party—A customer joining online services will be able to make transfers and payments online and to define fixed beneficiaries in his account, without needing to come to the branch as has been required until now. Moreover, the restrictions that were imposed on the banks until now regarding maximum amounts that could be transferred by customers to nonregistered beneficiaries have been removed.
(e) Update of customer information—A customer joining online banking services will be able to update information in his account (such as surname and address) and to obtain an initial password and release a blocked password online, without having to come to the branch. Until now, for instance, releasing a blocked password online restricted activity in the account until the customer came to the branch.
(f) Obtaining information aggregation services—In addition to full digital activity, a customer will be able to receive aggregation services of information from any financial institution with which he has an account. The customer can choose the bank at which he wishes the information to be collected. The information will enable the customer to more efficiently manage all of his banking activity and to make more informed decisions. The aggregation of the information by the bank will be made available as a service to households and to small and large businesses which, for the most part, manage accounts at more than one bank.
(g) Correspondence with the bank via electronic mail and receipt of notices from the bank other than by regular mail—The possibility of using electronic mail has been expanded beyond what was possible until now. Directive 420, which is complementary to this directive, has been amended and sent to the banks today as well. The amendment sets out that it will be possible to send most notices to banking corporation customers via online banking if the customer wishes.
(h) Receiving warnings from the bank via mobile device or electronic mail, in order to have more informed financial control and management over the account—The draft amendment to Proper Conduct of Banking Business Directive 420 sets out that the bank will be able to offer customers the ability to receive warnings that will help the customer in managing the account, such as warnings of expected exceeding of the line of credit and so forth, by mobile device (text messages) or electronic mail.
Alongside these changes, the directive imposes increased responsibility on the banks to manage the risks inherent in expanded remote banking activity and to protect customer information. This includes: adding controls, monitoring extra-ordinary activity in customers’ accounts, and sending warnings to customers in whose accounts extra-ordinary activity has been detected or a high-risk activity has been conducted. The banks are also required to take measures to customers in order to increase their awareness of the risks inherent in remote activity, and to guide them in what measures they can take to minimize the realization of those risks.