Red Book (hebrew)​


In recent years there has been marked
development of Israel’s payment system, primarily because innovative
technologies make it possible to reduce transaction costs, to increase the
speed of payments, to document and monitor transactions executed via electronic
means of payment, to improve ease of use—for payers and recipients—and to
provide immediate payment services. These technologies also make it possible to
expand redundancy in the payment services area and to strengthen business
continuity capability.

 

Pursuant to the Payment Systems Law,
5768-2008, one of the functions of the Bank of Israel is to regulate the
economy’s payment and settlement systems, which are critical infrastructures
for all economic activity, with the goal of maintaining their stability and
ensuring their efficiency. Under this authority, the Bank of Israel continued
to act to improve the efficiency and stability of the payment systems in 2015
and 2016. The Bank acted to encourage the use of advanced and lower-risk
electronic means of payment and increased its activity in the area of payment
and settlement system regulation with the goal of ensuring their stability.
Likewise, the Bank acted to enhance competition in the payment systems and to
make them more accessible to payment service providers that are not banking
corporations.

 

Among the most significant reforms in recent
years is the switch from physical to electronic
clearing of checks, in
accordance with the Electronic Check Clearing Law, 5776-2016. The law
makes it possible to switch from physical to electronic clearing of checks. In
the first stage, beginning November 8, 2016, interbank clearing became possible
for checks deposited via cellular application. The Electronic Check Clearing Law
significantly advances the check clearing process, supports processes of
increasing efficiency being adopted by the banking system and enables bank
customers to deposit checks electronically, in an advanced, convenient, and
efficient manner.

 

The activity of the National Payments
Council headed by the Bank of Israel’s Director General, Mr. Hezi Kalo, was
expanded in the past year in order to bring the market in line with regulatory
and technological developments, through collaboration of all the entities
involved in the sector. The Council’s responsibility is focused on two
functions: (1) supporting the attainment of stability and efficiency in the
payment systems in Israel; (2) promoting the use of advanced means of payment
and enhancing competition in the payment services sector.

 

In March 2014, the Joint Committee for
Promoting Advanced Electronic Means of Payment
was established, headed by the
Director of the Accounting, Payment and Settlement Systems Department at the
Bank of Israel, Mrs. Irit Mendelson. The Committee was set up among other
things in accordance with the recommendations of the Locker Committee, whose
goal was to reduce the shadow economy in Israel.[1]
The Committee for Advanced Means of Payment examined how to promote the use of
advanced means of payment, including digital checks and electronic wallets, and
published an Interim Report in November 2015. The Committee was of the opinion that the
use of advanced means of payment in Israel’s payment system is to be promoted through
a coordinated process, including regulation of the technological, legal,
and consumer-oriented infrastructures. The Committee’s main recommendations
were:

     1)     
To examine the need to set up a central clearing infrastructure and
secure national communication infrastructure to execute payments via advanced
means;

      2)     
To formulate a legislative memorandum for regulation of payment
services, a payment account, and clearing and issuing services;

      3)     
To bring the existing legal infrastructure in line with activity through
advanced means of payment;

      4)     
To advance an infrastructure at payment terminals (POS) that will allow
contactless transactions;

     5)     
To  examine the digital check
transaction execution chain;

     6)     
To advance consumer education and the creation of consumers’ confidence
in advanced means of payment.

 

The Bank of Israel is leading the
implementation of the recommendations of the Committee for Advanced Means of
Payment on several levels:

1)     
It is carrying out a comprehensive examination of Israel’s market needs
in a central retail infrastructure and the situation worldwide, as well as the
digital check transaction execution chain.

2)     
It set up a joint subcommittee to regulate payment services, which
compiled principles for regulating payment services and published them for public comment in
October 2016; a legislative memorandum is in an advance phase of preparation.

3)     
It appointed a team to examine the need to set up an additional payment-card
switch. The team published its final report in August 2016. The team recommended adopting measures
that will remove existing barriers in the market and will allow new entities to
join it. This step is an important pillar in opening the payment card market to
competition.

4)     
It set up a Payment Card Committee that defines and regulates the
execution of payment card transactions: The principles for development of a protocol for payment card transactions in Israel’s
market have been defined; principles were published that establish
that the access terms to
the Masav (ACH) and Shva systems must be objective, risk-based, transparent to
the public, and allow fair and open access to participation in the payment
systems.

5)     
Published regulation related to contactless transactions.

6)     
In 2015–16, the Bank of Israel collaborated on a comprehensive reform of
the regulatory and legal basis that will allow opening essentially all
financial services to competition and the entry of new participants in the
market and in the payment and settlement system, all in a secure manner that
does not risk the existing infrastructure: a Bill to Enhance Competition and
Reduce Concentration in the Banking Sector in Israel (Amendments); the
Oversight of Financial Services (Regulated Financial Services) Law, 5776-2016;
as well as amendments aimed at regulating credit and deposit services, and the
activity of P2P online intermediation platforms.

 

The Bank of
Israel is accompanying the process of technological revolution in Israel’s
means of payment sector, with an understanding of the importance of regulation
in order to ensure the realization of the advantages incorporated in them and
to minimize the risks along the way, while maintaining the stability and
efficiency of the payment systems in Israel.

 

Statistical
data and main developments in the Payment Systems:

 

The Zahav (the
Hebrew acronym for RTGS) system settles interbank transactions, provides final
settlement for clearing houses, and settles transactions initiated by the Bank
of Israel. Interbank transactions are those executed by banks and their
customers, including transfers from abroad. The Zahav system serves as a
clearing house for clearing houses, providing net settlement for clearing
houses—Masav (ACH), the Paper-based (Checks) Clearing House, and the Tel Aviv
Stock Exchange clearing houses (the Securities Clearing House and the Maof
(Derivatives) Clearing House). In 2015, about 603,000 transactions, with a
total value of NIS 96,000 billion, were settled through the Zahav system. Compared
with 2014, the number of transactions increased by 17.3 percent (514,000) and
their total value increased by 21.6 percent (about NIS 79,000 billion), so that
the average transaction amount increased by about 3.6 percent.

 

Figure 1 focuses
on customer transactions of up to NIS 1 million, and indicates that there was
an increase in the number as well as the value of such transactions. These
changes illustrate that the system is beginning to become widespread among
households as well as among small and medium sized businesses.

 

The Payment and Settlement Systems Division publishes its Main Developments for 2015 and 2016

 

In 2015,
transactions by CLS Bank, which carries out most conversion transactions
conducted in Israel in which the shekel is one party, totaled about NIS 1,037
billion, a decline of about 7.3 percent relative to 2014. The number of
transactions settled by CLS increased by 2 percent in 2015 compared with 2014.

 

In 2015,
Paper-based (Checks) Clearing House activity totaled about NIS 986 billion,
compared with NIS 941 billion in 2014, an increase of about 4.8 percent. The
number of transactions declined by about 2.2 percent—from about 118,000 to
around 115,000.

 

The Payment and Settlement Systems Division publishes its Main Developments for 2015 and 2016

Electronic credits
and debits are executed on the Masav system. The total value of debits on Masav
increased in 2015 by about 5.6 percent (compared with an increase of 12.5
percent in 2014), and the total value of credits increased by 5 percent
(compared with an increase of 3.5 percent in 2014). There are 28,071
institutions participating in Masav, including banking corporations, the Postal
Bank, government ministries and public institutions, as well as other clearing
institutions.

 

The TASE clearing
houses settle the results of stock exchange trading. Securities are settled on
the TASE clearing houses immediately after the funds are settled between TASE
members in the Zahav system.

 

Similar to most
stock exchanges worldwide, trading volume on the domestic stock exchange
increased in 2015. Average daily trading volume increased in 2015 to around NIS
1.45 billion (an increase of 19.5 percent vis-à-vis the previous year).

 

Table 2

Securities trading volumes, 2006–15, Value (NIS billion)

Stocks and convertibles

Government Bonds

Other Bonds

Total Bonds

Makam

Total

2006

360

356

68

424

198

982

2007

506

636

165

801

207

1,514

2008

481

761

224

985

192

1,658

2009

423

789

223

1,012

160

1,595

2010

498

579

218

797

291

1,586

2011

422

703

217

920

287

1,629

2012

264

748

247

995

155

1,414

2013

286

810

249

1,059

141

1,486

2014

297

774

249

1,023

157

1,477

2015

355

751

255

1,006

125

1,485

Yearly change (%)

19.45

-2.96

2.29

-1.68

-20.55

0.57

 

 

The English translation of the full document
will be published in the coming weeks.


[1] The Locker Committee recommendations indicated, among
other things, that in parallel with reducing the use of paper-based means of
payment (cash and anonymous checks), there is a need to create advanced digital
alternatives to them. The legislative process of a Cash Law has not yet been
completed, but the Bank of Israel is promoting the implementation of the
recommendations related to its areas of responsibility.