The Cost of Living Cabinet, headed by Economy Minister Naftali Bennett, made a decision today (Wednesday) to promote an instant debit card (debit card) at a controlled price.
During the discussion, the ministers approved a series of steps to be taken by the designated regulators, the Supervisor of Banks and the Commissioner for Antitrust, which are intended to allow consumers and businesses to use debit cards, where the fees paid by businesses are significantly lower. With a debit card, the customer is charged immediately, as with a cash payment, and the business pays a reduced fee and receives the payment immediately.
The steps that the regulators implemented are a result of the examination carried out in recent months following the December cabinet meeting in which the principles of the plan were presented.
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A study initiated by the Antitrust Authority in preparation for the measures shows that the introduction of instant debit cards will enable savings across the economy, estimated at NIS 500-700 million, and will significantly reduce the costs of all businesses. The study found that consumers currently bear the cost that is reflected in the prices of products. The measures that will be taken are expected to significantly reduce this cost, a reduction that will ultimately benefit the consumer and business community.
The Cabinet decision today indicates that the Bank of Israel will examine the advancement of the conditions necessary for the implementation of debit cards. This includes, among other things, a directive to the banking system to allow bank customers to use a debit card at a controlled price, and to examine the possibility of creating a single integrated card that can be used both as a regular credit card and as a debit card.
The decision also states that the Antitrust Commissioner will formulate a memorandum of law, within 90 days, that will allow him to determine the level of the interchange fee (the fee that credit card companies pay to each other in a way that increases the level of the fee paid by businesses) so that the interchange fee for instant debit transactions will be significantly lower than the interchange fee for regular credit card transactions. According to the estimate, an instant debit card will result in a reduction of more than 60% in the fee that the business pays to the credit card companies.
In addition, the Supervisor of Banks will examine, in consultation with the Ministry of Justice, a determination of guidelines that for transactions over NIS 500, every large business that accepts debit cards will be required to also allow continued payments via deferred debit, as is currently accepted. The purpose of this step is to allow consumers to choose to continue using deferred debit for large-scale transactions.
Economy Minister Naftali Bennett: ""The lack of the option of immediate debit creates high fees of about half a percent that businesses pay, with an emphasis on small and medium-sized businesses. At the end of the reform, the consumer will be able to pay at the business with immediate debit, a charge that will come directly from the current account, and then the fees will drop significantly, and this will be passed on to the consumer and small and medium-sized businesses - in essence, it will be like cash. There is no reason for consumers and businesses to pay both for the product and the fee to the credit companies. Today, consumers and small and medium-sized business owners pay more than NIS 500 million in unnecessary fees due to the use of deferred payments on credit cards. The time has come for the State of Israel to also have the option of cash credit and not just cash checks - just as is customary throughout the world. We are launching the debit card reform today, while paying attention to the concerns that have been raised, and creating an opening to allow the continued use of deferred debit cards in large transactions.""
The Commissioner for Antitrust, Prof. David Gila"The cabinet decision, which is based on the findings of the Antitrust Authority's research, constitutes the opening shot in a significant improvement in competition in the credit card sector, for the benefit of the entire public.".
The Supervisor of Banks, David Zaken: ""The proposed reform to promote the use of immediate debit transactions as part of the means of payment in the economy is intended, among other things, to create a cheap and effective alternative to the use of cash, as well as to increase competition in the field of clearing transactions with debit cards. We will work to ensure that the increased use of immediate debit cards will not increase the cost of use for cardholders and businesses, in deferred debit transactions.".
