The cost-of-living ministerial committee approved Wednesday the outline of a regulatory regime for issuing debit cards in Israel for the first time.
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The proposed debit card with fees that would fall under government supervision offer to give consumers and businesses alike a lower-cost option to regular credit cards. Unlike credit cards, debit card purchases are debited to the customer’s bank account immediately. Under the new program, fees would be better supervised and lower.
“The time has come that in Israel there will be a possibility also for ‘credit-cash’ and not just ‘check-cash’ exactly as is common all over the world. We are launching the reforms in credit cards today,” Economy Minister Naftali Bennett said after the meeting.
A debit card is considered akin to cash, which is why businesses taking payments pay the credit card issuer much less . It receives the money immediately, rather than waiting for the next billing cycle, which can ran up to a month away.
The decision approved by the ministers was based on a proposal originally formulated by Harel Locker, the director general of the Prime Minister’s Office, along with Antitrust Commissioner David Gilo and the Bank of Israel’s Supervisor of Banks David Zaken.
The regulators were instructed to take the necessary steps to implement the new means of payment and a regulatory system for overseeing it. The ministers were presented with the preliminary proposal last December and were now presented the with final proposal after the regulators examined the issues involved and prepared a plan for implementation.
The Antitrust Authority found that the economy could save between 500 million and 700 million shekels ($144 million and $201 million) annually from the use of the debit cards. Small and medium-sized businesses, for example, would save a lot of money by avoiding the type and fees and high interest they currently pay. Customers also stand to benefit because they usually take th thit when businesses raise their prices to cover the credit card fees. The cost of transaction could go down by as much as 60%.
A number of basic questions still go unanswered. For example, will a single card serve for both credit and debit with the consumer making the decision at the time of the purchase on how to use it? Or, alternatively, would two separate cards be necessary?
Also, the new fee schedules have yet to be decided on. Regulators are weighing whether different rules should apply to large purchases.
“There is no reason for consumers and businesses to pay for both the product and on the fees to the credit card company. The customers and small and medium-sized business owners pay over 500 million shekels today in unnecessary fees because of the use of deferred payments on credit cards,” Bennett said.
Gilo said the decision would open up competition in the credit card market for the benefit of the entire public.