The Bank of Israel continues with measures to open the payment card market to competition

On July 18, 2016, the Bank of Israel published[1] a document on “Principles and Complementary Steps in the Development and Use of a Protocol for Payment Card Transactions”, with the aim of creating conditions in the payment card market that would enable the entry of new players along the entire transaction chain.  In the months following the publication of the Principles Document, the Bank of Israel acted to advance and implement those principles with the cooperation of the relevant interested parties in the market, within the Payment Card Committee in which representatives of the various players in the payment card market are members.

 

This notice is an update to the public regarding the results of the operative measures taken thus far in implementing the protocol principles.  The Bank of Israel will continue advancing the implementation of the principles set out, will monitor the developments in the payment card market, and will examine the need to take additional steps.

 

Director of the Bank of Israel’s Accounting, Payment and Settlement Systems Department Irit Mendelson said, “The measures taken thus far have removed barriers to the development of competition in the payment card market, and lay the groundwork for the development of the payment card market in the future. We have implemented these measures while providing maximum flexibility to all players in choosing the services they would like to receive and provide.  I call on all parties that are interested in operating in the payment card market in Israel to study the changes as part of their considerations of entering into this market.”

 

The following are the measures taken thus far:

 

-  Accessibility of the protocol:

-    The information in the protocol, the publication of which will not put the payment system at risk, is accessible and available to the general public through the website of the Shva company[2], which operates the “payment card services” system.

-    Any interested party can have full access to all the information in the protocol, subject to signing the confidentiality agreement that appears on the Shva website.

-      The protocol was translated into English, and is available under the same conditions as the Hebrew version, in order to also allow parties abroad to examine the potential of participating in the Israeli payment card market.

 

 

-  Modularity of the protocol

-     Following discussions by the Payment Card Committee, the Bank of Israel formulated a document on “Required and Optional Components of the Protocol”​ , which outlines the protocol implementation policy in the payment card market.  These components will enable the various players to choose and implement the protocol partially, according to their needs.

-      The required and optional components were defined while determining the minimum required components allowing the maximum flexibility and adoption of international standards or adjustment to them.

 

-  Use of the protocol

-     A procedure dealing with how to handle development requests and defining the minimum service level by the protocol operator was published on the website of the Shva company[3].

-    In the first stage, a fee for use of the protocol will not be collected.  At a late stage, the model will be examined in accordance with developments in the market.

 

The payment card market in Israel is currently characterized by the fact that each business must purchase and implement the entire service and functionality package supported by the payment card protocol in Israel.

 

The mentioned above processes are a significant step in opening the payment card market to competition, since their implementation will enable businesses, particularly small businesses that have not so far honored payment cards, to begin accepting payment cards in line with their needs.  For instance, businesses can purchase an acquiring services package that does not include acquiring services for foreign exchange transactions, at a lower price than the acquiring package that does include foreign exchange transactions. This process will affect all cardholders in Israel, in that it will enable them to use payment cards at a much broader array of businesses.