Bank of Israel issues a Review of developments in the country’s payment systems landscape over recent years
· There was dramatic growth in the total value of digital payments. In 2020, ACH wire transfers accounted for 51% of total payment values, comprised of direct credits (42%) and direct debits (9%). In addition, payments made via Zahav-Israel’s RTGS system-accounted for 31% of total payment values. There was also an 86% increase in the use of payment cards during the last decade, reaching nearly NIS 1 billion per day in 2020.
· During the COVID-19 period, Israeli payment systems demonstrated particular robustness. The public migrated from in-person physical payments to remote digital use throughout 2020 and particularly during lockdown periods. Israeli payment systems’ nearly 100% levels of availability and reliability enabled this robustness and stemmed in part from supervision by the Bank of Israel.
· The Payment Systems and Settlement Department is examining which steps are necessary to remove domestic barriers to entry facing PayTech companies, and to enable existing and potential payments stakeholders to operate in Israel.
The Review published today presents developments in payment systems in Israel from the perspectives of innovation, competition, stability and efficiency. The report describes the evolution of payment methods and services, and the operation of supervised payment systems during the years covered. The Review also presents challenges facing the Bank of Israel’s Payment Systems and Settlement Department as it aspires to promote and develop the Israeli payments landscape. In addition, highlights are presented from payments activity in Israel during the COVID-19 crisis.
The Director of the Payment Systems and Settlement Department, Oded Salomy, said: “In the coming years, the Bank of Israel will continue expanding and deepening the reforms it has led so far in the area of payments and related fields. We will continue to act to close the gap that has emerged between the payments space in Israel and other advanced economies, and we will strive to take a leadership role in this field in the international arena.”
Payment methods and payment systems in Israel are in the throes of a regulatory, commercial and technological revolution, progressing to a more advanced, digital, and user friendly environment; becoming more available to the general public; and becoming more accessible to nonbank as well as bank entities.
In recent years, the Israel payments market has experienced significant technological progress, such as implementation of the EMV and NFC protocols that enabled deployment of advanced means of card-based payments, particularly digital wallets and contactless payments. The Israel market’s migration to EMV and NFC was driven by the Bank of Israel’s regulatory agenda, which led to, among other things, the entry of nine digital wallets in the past 18 months alone. In addition, a new payment system—a retail Faster Payments system—was developed, and steps were taken to increase access to the payment systems by nonbank entities. Another step, which became effective in July 2021, was the deployment of increased frequency for credit card settlement, accelerating from settlement once per month to once per day. In addition, a series of measures were taken to enhance advanced digital services for customers, including open banking, licensing and deployment of a new digital bank, “one click” current account switching between banks, and more.
All the supervised payment systems in Israel featured particularly high levels of availability and stability. Between 2018 and 2020, Israel’s RTGS system, Zahav, featured average levels of 99.988% availability; the national ACH clearing house, enabling direct debit and direct credit wire transfers, operated by Masav, featured average levels of 99.999% availability; the national switch for payment cards, operated by Shva, featured average levels of 99.996% availability; and the ATM payment system operated by Shva also featured average levels of 99.974% availability.
Over the past decade, Israel experienced dramatic growth in digital payment values. In 2020, ACH wire transfers accounted for 51% of total payment values, comprised of 42% direct credits and 9% direct debits. Payments made through the Zahav system accounted for 31% of payment values. During the last decade, there was a marked increase in the use of payment cards, with an 86% increase in payment values, to nearly NIS 1 billion per day in 2020.
With the exception of payments for housing, vehicles, and nonprofit organizations, volumes via payment cards penetrated 69.7% of household expenditure, an inordinately high figure by multiple measures.
The public migrated from in-person physical payments to remote digital use throughout 2020, particularly during lockdown periods, with almost no interruption.
In 2020, card-not-present (CNP) transactions accounted for approximately 58% of the value of all payment card transactions. The volume of mobile check deposits via check scanning using a smart phone application increased from 11% of all check presentations in 2019 to 21% in 2020. The stable behavior of supervised payments systems in Israel during these changes through the COVID-19 period attested to their robustness.
Measures taken in the payment systems field are intended to remove barriers and to lay the groundwork for future developments, while providing maximum flexibility for all stakeholders in choosing the services they want to receive and provide. Developments in the market are accompanied by appropriate regulation that ensures stability of supervised payment systems and their users.
The Bank of Israel’s Payment Systems and Settlement Department is examining what measures are necessary to remove domestic barriers to entry faced by PayTech companies and to allow existing and potential stakeholders in the field to operate in Israel. The Department is responsible for the stability of the payment systems, alongside the advancement of their overall efficiency, and for ensuring fair and equitable access to those systems for all payment service providers who meet the access conditions and connection requirements by the relevant system.
The Review published today references payment system data from 2018 to 2020, and also presents developments from 2021.
The Hebrew overview published today will be followed and an English translation that will be accessible on the Bank of Israel website in the coming weeks.