Antitrust Authority director general David Gilo is taking action to open the credit card market to competition. Today, he notified Automated Banking Services Ltd., which is owned by the banks, that it must make a major change in its operations to allow new companies to be connected to its systems cheaply and easily within two years.
Automated Banking Services has the systems for clearing credit cards, and the industry cannot operate without it. The Antitrust Authority carried out a thorough examination of competition in the credit card market, and found that one of the main barriers to the entry of new companies was the difficulty in connecting to Automated Banking Services' systems.
Gilo ordered Automated Banking Services to allow new companies (if they are established) to be connected to it at a cost of just NIS 400,000 (a fraction of what the company currently charges). Automated Banking Services will also have to support international technology standards, which will facilitate the entry of new companies into the credit card industry.
Several months ago, the Bank of Israel published the conditions for new credit card clearers. It set tough conditions, including high equity requirements. Gilo's step is therefore not enough to open the credit card market to competition, and sources believe that new companies will enter the market only if the Bank of Israel relaxes its requirements.
Three companies dominate Israel's credit card market: Isracard Ltd., Leumi Card Ltd., and Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa). The companies posted an aggregate profit of over NIS 300 million in the first half of 2013. Credit card use totaled NIS 110 billion in that period.
Published by Globes [online], Israel business news - www.globes-online.com - on August 27, 2013
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