The Locker Committee to reduce cash use, headed by Prime Minister's Office director general Harel Locker, released the chapter dealing with debit card use today. Unlike standard Israeli credit cards, which charge the cardholder’s bank account once on a month on a fixed date, debit cards charge the bank account at the time of the transaction. The aim of the process is to improve tax collection, which will lead to a larger tax base, and to combat financial crime and money laundering.
According to the guidelines, businesses will be guaranteed payment within three days of the transaction, through arrangements between the credit card company, bank clearance, and the business, unlike the current system, in which businesses are paid monthly. Furthermore, the Supervisor of Banks will also rule that there should be no "line" fees for debit transactions, making debit card use cheaper than withdrawing cash.
Another recommendation is that the Antitrust Authority head immediately enact laws to separate cross-commissions on transactions made using debit cards, to accurately reflect the risks and costs to the credit card companies, by reducing the cross-commission from the current 0.735% on each transaction, to just 0.2%, similar to rates in other developed countries.
Another recommendation made the by the committee is for the Supervisor of Banks to issue immediate instructions to the banking system for debit cards to allow ATM cash withdrawals, so they may be marketed as an off-the-shelf product to the banks’ customers for banking transactions, with regulated, lower monthly fees. The committee also asks that ATM systems be connected to the debit system, which will allow for competition among card processors. Currently, ATM systems are not linked to the Automatic Banking Services system used by Israeli banks and credit card companies.
The Israel Postal Bank is also expected to be part of the new market. The committee asks to allow the Postal Bank and other bodies to issue pre-paid shekel debit cards up to NIS 10,000, with the Postal Bank required to issue debit cards on demand, and the opening of necessary bank accounts. Banks will also be required to issue debit cards on demand. More importantly, the committee has asked to ensure that the existing restrictions on debtors of limited means (in accordance with the Baliff’s Law for seizure of goods) not be applicable to debit cards.
Published by Globes [online], Israel business news - www.globes-online.com - on March 19, 2014
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