Remarks by Avner Ziv, Director of the Information Technology Department at the Bank of Israel, on financial infrastructure to enhance competition and innovation in the Israeli economy

 Presentation (Hebrew)​

Avner Ziv, Director of the Information Technology Department at the Bank of Israel, spoke today at the Fintech Junction conference, and discussed the measures being taken by the Bank of Israel to improve the economy's openness to competition and to enabling innovation in financial services.


Ziv began his remarks by welcoming the many startup companies participating in the conference, noted that the Bank of Israel views them as an important part of the potential increase of growth in the Israeli economy, and said that the Bank of Israel is considering various ways to encourage entrepreneurs to contribute to innovation in financial services in the Israeli economy.


He noted that the Internet and globalization era enables the mobility of services, including financial services, which also makes it possible for Israeli companies to offer digital financial services delivered over the Internet.  He reviewed some of the measures being taken by the Bank of Israel as part of advancing its targets in the area of increasing competition and efficiency in the financial system, and advancing effective and reliable systems and means of payment: the "credit data system" began operating in the credit market in April 2019, and its main aims are increasing competition in the field of retail credit, improving the standing of the customer, and strengthening the abilities of credit providers to manage credit risk.  There are already more than 30 credit providers in the economy that are reporting on a daily basis to the system, including banks, fintech companies, government entities, credit card companies, leasing companies, insurance companies, and more. 


In addition, many credit providers are enquiring about connecting with the system.  As of now, there are two credit bureaus operating, which make it possible to obtain a credit statement and rating, as well as monitoring services regarding customers in Israel, subject to the customer's consent, which opens the door for fintech companies to offer advanced financial services on the basis of the system's retail credit data, financial consulting, and cost comparison.  An initial statistical review of the system's data shows that the Israeli customer is a "good customer" who behaves responsibly relative to what is common in the world, and we are witnessing a conversation that is starting to take shape among the public concerning ways to improve credit ratings. Even now, there is already active use of the system in the financial sector, and within the first few months of operation, credit providers made more than 1.5 million queries in the system, providing them with full transparency regarding the customer's level of exposure.  Ziv emphasized that the Bank of Israel is seeing increased competition over customers between the various credit providers, and looks forward to the entry of additional participants in the market.


s.  The Bank of Israel became a formal participant in the "Berlin Group" standards organization, which is formulating the NextGenPSD2 standard.  The Bank of Israel's target for the financial system is "August 2020—compatibility with PSD2", after the first version standard of the project is published in August 2019, which will enable a customer consent model, listing of current account and payment card transactions and balances, and execution of individual payments.  Later on, each year, a new version of the standard will be released, which will support additional information and transaction types.  The Bank of Israel is managing this project in conjunction with the banking system, as well as with a broad forum of fintech companies whose participation influences the formulation of the standard in a way that will enable them to operate in the Israeli market.  Ziv noted that the "open banking" infrastructure opens the door to fintech companies and banking corporations to enrich the financial services offered to the Israeli customer.


Ziv noted that the Bank of Israel is currently examining various ways to advance faster payments infrastructure in order to enable innovative applications and improve fintech companies' access to the payments system.


Regarding blockchain technology, the Bank of Israel has been looking into the issue over the past year and, in consultation with the financial corporations, is examining the worthwhileness and significance of establishing such an infrastructure to enable applications such as a joint KYC service and other services.


Ziv noted that we obviously cannot ignore Facebook's recent announcement of the Libra currency.  This is a significant step, perhaps the first of its kind, among FABAA corporations in the financial field, and the Bank of Israel, like other central banks, will examine its significance and, if necessary, will formulate a position on the matter.