BoI supports online banking competition

Hedva Ber

The Bank of Israel wants to help customers shop around banks online for the cheapest services. 

The Bank of Israel is putting its weight behind a project to establish infrastructure for sharing information among financial concerns, headed by the commercial banks. Sources inform "Globes" that the Bank of Israel recently held a meeting with representatives of the banks at which technological possibilities for establishing such infrastructure were discussed.

The founding of such infrastructure was one of the recommendations by the Committee on Increasing Competition in the Banking and Financial Services (the Strum Committee). It appears that this is one of the first items that the Bank of Israel has already begun implementing. The information sharing system has several purposes. The most important one is improving competition by enabling customers to ask for proposals from competing concerns for various services according to the customers' particulars, thereby opening a kind of virtual bank market. As of now, comparison is mainly between fee schedules, which in many cases correspond only loosely to the actual price paid.

The Strum report recommended establishing technological infrastructure to enable consumers to conduct financial transactions with a click through competing financial institutions other than the bank in which the customer keeps his current account. The customer can then select any of an institution's financial services on better terms, regardless of where his current account is kept.

It has not yet been determined what information will pass through this infrastructure or what it will be used for. The goal, however, is to establish a platform for future projects, while simplifying and streamlining banking work procedures. Another goal of establishing the platform is to conform to global technology standards and regulations. For example, under the European PSD2 rules, the banks will have to allow a third party to make payment transactions through them in their customers' accounts, and to share the information about those accounts. These rules were also designed to attract new players, mainly from the fintech sector, to operate in the payments sector. The Strum Committee recommended consideration the implementation of these rules in Israel.

Setting up such a system is regarded as difficult in several aspects. First of all, the banks' computer systems differ from each other, and are out-of-date, so sharing information between them is not a simple matter. Information security and the need to make sure that such sensitive information is not leaked and is not exposed to a cyber attack are also a problem. Another essential condition is a user friendly interface, so that customers will use the platform.

The Bank of Israel is considering a number of options for setting up this infrastructure. Banking sources believe that the preferred options are present are the establishment of a hub and the use of the government B2G networkk.

Published by Globes [online], Israel Business News - www.globes-online.com - on January 26, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2017

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