Implementation of the Electronic Check Clearing Law has been completed – another step toward the world of advanced means of payment

The Bank of Israel is pleased to announce the completion of another significant stage in the check settlement reform – the complete implementation of the Electronic Check Clearing Law, which enables the conversion of a paper-based check to a digital record that constitutes legal evidence, which can be recalled at any time as necessary, without keeping the physical check.

 

Irit Mendelson, Head of the Accounting, Payment and Settlement Systems Department at the Bank of Israel, said, “The accelerated technological developments that have taken place in recent years have not left the payment systems field behind, and they make it possible to advance the market to advanced systems that are more convenient, more efficient and more secure. The Bank of Israel is leading the technological revolution in the means of payment in Israel, with the understanding of the importance of regulation, in order to ensure the actualization of the advantages inherent in the technological improvements while minimizing risks and maintaining the stability of the payment systems in Israel.  Implementation of the Electronic Check Clearing Law is a major component of this process.”

 

The first stage of implementation of the law began in November 2016, when most banks began carrying out interbank settlement of checks deposited through cellphones.  The service is possible for checks marked “To the Beneficiary Only” up to NIS 10,000 per individual check.  Beginning on November 21, 2017, image files of the physical checks deposited for payment from all banks are created by the bank where the check is deposited, and the image files are sent to the bank from which the customer wrote the check, without the physical checks needing to be kept for years as was required until now.

 

Implementation of the Electronic Check Clearing Law makes it possible to provide banking services that are less expensive, innovative, more convenience and quicker for customers.  Check imaging allows the banks to expand the service for depositing checks through the banking application and cellphone, which is considered a customer-executed transaction, carrying a fee that is up to 75 percent lower than for a teller-executed transaction.  Since the start of the reform, there has been a significant increase in the use of check depositing by cellular.  In 2016, about 200,000 checks were deposited in this way, while in 2017, by the end of October there were about 2 million checks deposited in this way. Each year, more than 100 million checks are being cleared.

 

In addition to the changes in the deposit process, the check return process has also changed.  When a check is returned, the customer can save the need to physically come to the branch.  The customer can ask the bank, electronically, to deposit the check again, if there is nothing to prevent this; ask the bank for a document called an “output of a computerized check” which will serve as a legal alternative to the check itself; or independently print the “output of a computerized check” from the website of the bank where the customer manages his account.

 

Ronit Chitayate, Head of the Payment and Settlement Systems Division at the Bank of Israel, and Chairman of the Bank Settlement Committee[1], said, “The completion of the implementation of the Electronic Check Clearing Law was made possible thanks to the cooperation, professionalism and investment of the Bank Settlement Committee members, including the Bank of Israel, the Postal Bank, and the banking system.  The law advances the settlement of checks in Israel, bringing it to the accepted level in the advanced world.  These are significant changes both from technological and business standpoints, as part of which the check settlement, storage and retrieval processes are updated.  This is a complex project that required preparation on the part of the entire banking system, in order to implement changes in their business and technological processes, all while meeting joint timetables for all entities and beginning implementation of the law simultaneously.

 

Further details and explanations, the rules, and the output, are available on the Bank of Israel’s website at:

http://www.boi.org.il/en/PaymentSystem/Pages/Cheque-truncation.aspx


[1] The Bank Clearinghouse includes the Paper-based (Checks) Clearing House and Masav.  It is managed by the Bank Settlement Committee, which is made up of representatives of the Bank of Israel and the banking system.  The Bank of Israel manages the committee.  In this framework, the settlement rules are set and changes and reforms in the field are advanced.​