As part of the numerous steps being led by the Bank of Israel and the
Ministry of Finance to enhance competition in the financial system, a new
system will be launched on September 22, 2021. The system enables banking
system customers to switch from one bank to another—online, conveniently, and
securely, at no cost and within 7 business days. In addition, after switching
the activity and automatically closing the old bank account, to the extent that
additional activity remains, the credits and debits that reach the old account
will be automatically forwarded to the new account (“Follow me” service).
This complex system, which was developed over more than 3 years by the
banking system, through, among others, Masav as
the project’s main factor, markedly simplifies the existing process of
switching, and will enable customers to improve their account terms vis-à-vis
the banks.
Minister of Finance Avigdor Liberman said, “Rapid transfer from one
bank to another is an important step and an integral part of the policy of
enhancing competition that we have adopted in various industries. The transfer
is carried out at no cost in order to make the service accessible to all the
State’s citizens. We will continue working to reduce bureaucracy in significant
focal points that impact on, and ease, our daily conduct.”
Governor of the Bank of Israel Prof. Amir Yaron said, “Completing
this step is another stage on the way toward an open, transparent, and more
competitive financial system that we are promoting on several fronts, and that
will enable customers to easily and conveniently choose the providers of the
various financial services they use. We will continue to utilize the digital
age available to us in order to advance processes and reduce barriers in the
financial system and in the payment systems. The system was established after diligent
work and the investment of considerable resources at the Bank of Israel,
together with the Ministry of Finance, Masav, and the various banks, and I
would like to commend all the partners in this work.”
Supervisor of Banks Mr. Yair Avidan said, “Launching the online
system for switching banks is a significant step in enhancing competition in
the financial system, and joins additional steps that we are leading with the
goal of encouraging competition, for the benefit of the public. The option to
switch banks very easily, securely, and at no cost, will strengthen both customers’
negotiating position in negotiating with the bank regarding improving the
account management terms, as well as the competition among banks for the
service. We will continue to lead additional steps with the goal of making
things easier for the public in their conduct vis-à-vis the bank.”
In March 2018, an amendment to the Banking (Service to the Customer) Law,
5741-1981, was passed, which requires the banks, at the customer’s request, to
act to enable the customer to move his or her activity from the bank in which
the account is managed to another bank in an online, convenient, and secure
manner, at no cost. The online system will make it possible to switch Israeli
households’ current accounts in a
convenient and friendly manner, other than accounts with a complicated issue or
that have some legal hold against them, and
thus will markedly simplify the current complexity of the switching process
between banks.
The process of switching the account shall take place within 7 business
days. Within such process, it will be possible to switch the following
financial activities: credit balances in shekels and in foreign currency, debit
balances in shekels and in foreign currency, authorized debits of a current
account, checks, securities (Israeli and foreign), payment card—bank and
nonbank—activities, and standing orders.
With regard to loans (including housing loans), and with regard to deposits
and savings, special arrangements were made, according to which the banks will
work on an individual basis with the customers regarding the handling of such
products.
With the goal of easing things for customers, the process of switching
banks through the system will also allow a “Follow me” (routing) mechanism for
two years from the date of the switch. This means that transactions that
arrive at the old account after the switch, will be automatically routed to the
new account, in contrast to the current situation in which all debits and
credits are returned because the account is closed, and the customer must
contact the various entities that are crediting or debiting the account.
In order to simplify the process, for any issue that arises during the
process of switching banks, customers will have one address—the new bank—which
the customer can contact about any issue. It is also noted that in a case of failure
in the switching process or the “Follow me” mechanism, it will be the new bank’s
responsibility within the framework of legislation that is currently being
promoted by the Ministry of Finance.
Submitting a request for transferring between banks will be possible via
the banks’ websites (via home computer or mobile device) as well as at bank
branches.
Note that the transfer between banks through the system will be possible
among all the banks in the banking system except for Union Bank, which is
expected to be merged with Bank Mizrahi Tefahot, and Bank of Jerusalem, in
which the number of customers managing a current account is very low, both in
absolute number of customers and in regard to the bank’s share of the system.
Customers of those banks who are interested in switching their financial
activity to another bank, will still be able to do so via the current mechanism
as determined in Proper Conduct of Banking Business Directives no. 432 on
“Transferring activity and closing a customer’s account” and no. 439 on “Debits
by authorization”.
With regard to the first digital bank, switching to it through the
online system will be possible as of April 1, 2022, as the bank is still in the
stage of being set up, which is expected to end by that date.
Further information and
answers to frequently asked questions, can be
found at https://www.switchbank.org.il.