Apple Pay is launching in Israel on May 5, making it the first major international player with deep pockets and broad financial technology to enter Israel’s payment market.
An estimated 20-30% of smartphone owners in Israel have Apple devices, meaning Apple should be able to turn a handsome profit by offering the service here. Under Apple’s contract with Israeli banks and credit card companies, Apple will pay a 0.05% fee on average for all transactions via its platform.
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In and of itself, Apple Pay is not expected to cause a dramatic change in Israel’s digital payments market, but it is pushing other players to the realization that they, too, need to offer digital payment options and invest money and resources in development.
Currently, Bank Hapoalim’s Bit app is the most popular digital payment option. Hapoalim has invested some 400 million shekels in development today, but Bit’s payment services are still not profitable for the company on their own.
All the market players know that a significant presence in the digital payment market is necessary to reach consumers, in order to woo them as potential future consumers of credit and financial services such as mortgages, deposits, investments and more. These potential future sources of revenue are expected to offset current losses from digital payment apps and subsidize the cost of running them.
Hapoalim, Bank Discount and Bank Leumi have sunk hundreds of millions of shekels into developing such products so far.
Hapoalim offers Cal credit cards to Bit users even if they don’t have accounts at the bank. Cal is owned by Bank Discount. Hapoalim is also offering its users digital payment options via Bit at some businesses, including gas stations. It is also considering using Bit as a future platform for digital banking services such as credit and deposits.
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Grocery chain Supersol is planning to launch its own digital app in partnership with Bank Discount’s Paybox app.
Another local market player is Pepper, owned by the Leumi group. Bank Leumi also offers its own customers digital wallet services.
Credit card companies Max and Isracard have also offered digital wallet services, and the First International Bank of Israel offers its own payment app.
The long-term question is whether the proliferation of digital banking services will lower credit and banking costs for Israeli consumers.
However, all of these apps are available for Android devices, but not for iPhone users. For some 1 million Israeli consumers, Apple Pay will be the first to offer payment via app.
Digital payments are a convenience for consumers who forget their wallet at home but have a smartphone, for example. Some stores accept payment via apps such as Bit, or the proprietary apps released by Leumi and FIBI.
Two other international payment giants – Google Pay and Samsung Pay – are also expected to enter the Israeli market soon.
While Apple users account for only 20-30% of all smartphone owners in Israel, they are considered to be more technologically savvy than average and therefore Apple Pay stands a good chance of catching on in Israel.
Should a phone be stolen, users need to inform the credit card company to which the app is linked, but the credit card itself does not need to be canceled.