The Bank of Israel has released a draft for public comments relating to a Proper Conduct of Banking Business directive on “Implementation of Open Banking”, which will enable third-party access to customer’s accounts.
The directive will allow licensed and supervised third parties to access information and carry out transactions via a customer’s account providing they have provided explicit consent.
Bank of Israel Governor Prof. Amir Yaron commented: “This is another step that will advance the Israeli financial system toward the future. It will help create real value for the financial customer in a variety of products, for instance by comparing costs and obtaining financial services from a variety of entities, which will contribute to promoting competition both within and outside the banking system.
“I view this as another breakthrough in the financial innovation that we are continuing to promote at the Bank of Israel. This is in parallel with the risk management that must accompany this measure, which requires complementary legislation and proper licensing and supervision of the nonbank entities that will gain access to banking information.
“I hope and believe that we will see an increasing number of technology and fintech companies operating in Israel thanks to the implementation of the open banking standard. This process is due to the intensive joint work of the Banking Supervision and Information Technology Departments at the Bank of Israel, reflecting significant synergy thanks to experience and regulatory understanding alongside technological innovation.”
This regulation is the latest in a plethora of steps being taken by the Bank of Israel to advance competition and innovation in the Israeli banking system, joining the likes of financial regulators across the UK, Australia, Singapore, the EBA, and others who have published Open Banking principles for the financial system.
Open Banking is hoped to be a step forward in the development of new services and products across the payments industry, which may subsequently increase competition for financial services. This is expected to be reflected in lower prices and offerings of innovative products and services to customers.
In the first stage of the directive, which will take place within a year of the framework being published, access will be provided to information on balances and transactions in the customer’s current account.
Information on bank and non-bank payments will be made accessible in the second phase, which will be actioned in 18 months, allowing banks to initiate payments in the customer’s bank account.
Within two years of the directive being published, banks will gain access to additional customer information on the customer’s credit and loans, deposits and savings, and on the customer’s securities portfolio.
The Bank of Israel added: “In order for the customer to obtain a full financial picture, consulting, and value offers, we must work to advance the infrastructure for an open financial world that will include all financial entities in Israel. The open banking infrastructure is the first step in advancing this philosophy.”