More and more businesses are accepting credit cards for payment, according to 2016 figures for credit card use from the Shva (Automated Banking Services) company. The figures, which are being published exclusively in "Globes," show that the number of credit card terminals in Israel has risen by 27% to 150,100 over the past four years, and has doubled over the past decade.
The reason is that more small business owners have decided in recent years to accommodate credit card clearance. Financial system sources said that this especially prominent in parking lots, taxis, and even stands in open-air markets. Up until several years ago, paying by credit card was not allowed at these places.
Shva operates Israel's credit card central clearance system. The company's data show that the volume of credit card transactions increased by 7.2% to NIS 272.4 billion in 2016. With an increase of only 3.8%, compared with the corresponding quarter in 2015, the fourth quarter of 2016 was relatively weak, compared with the preceding quarters.
These figures do not include overseas use of credit cards or purchases made on foreign websites, which have also been rising sharply. Even without these figures, however, credit card use is clearly growing.
Credit cards in small businesses, too
On the other hand, the size of the average credit card transaction is on a downtrend, falling from NIS 218.10 in 2015 to NIS 213.90 in 2016. The fall in the average transaction size, however, indicates that the use of credit cards has been expanding. Credit cards, which were previously used primarily for large-scale purchases and payments in installments, are now also being used for small transactions. Credit card industry sources said that there were far more transactions for a few dozen shekels than in the past.
The increased use of credit cards is also reflected in the number of transactions. The figures show that the number credit card transactions exceeded the one billion mark last year, reaching 1.02 billion, nearly 8% more than in 2015. The strongest month was August in the summer vacation peak season, during which 112.7 million transactions took place.
The expanded use of credit cards, as reflected in both the volume of use and an increase in the number of businesses accepting this form of payment, is important, in view of the significant changes anticipated in the sector. For example, use of the EMV standard, an international standard for securing credit card transactions, is now due to enter the market. Credit cards meeting this standard are also called smart cards. These cards have a special chip. When the transaction is conducted, the customer types in his secret code for using the card. Among other things, the use of EMV is designed to reduce the potential for fraud in the use of magnetic cards, and to accommodate the introduction of advanced means of payment.
The switch to the EMV standard involves a change in the procedure for the customer and the business in which the credit card is used - a process of becoming accustomed to the changes is necessary. The Bank of Israel is leading this measure. Under the original plan, both to the hardware and software of every new terminal sold to a business this year should have been adapted to EMV use. As reported several weeks ago in "Globes," however, the market is still unprepared for the changes, and there are almost no terminals with both hardware and software currently working on these technologies. The transitional process in the market is therefore expected to be longer than planned.
The major banks are slated to sell their credit card companies soon, following passage of the Strum Law. This law includes measures for bolstering competition in credit clearance, which is designed to lower prices. At the same time, the potential buyers of these companies can at least find comfort in the fact that the sector is growing in Israel, and this trend is not likely to change in the near future.
Published by Globes [online], Israel Business News - www.globes-online.com - on January 9, 2017
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