Israeli Fintech Startups Take On Israel’s Central Bank

Several players in Israel's fintech ecosystem allege that the Bank of Israel is preventing access to data, hindering competition

Omri Milman 12:2921.04.19

Israeli fintech startups are taking on Israel’s central bank for what they say is a policy of withholding data and hindering competition. In a letter sent to the Bank of Israel’s Governor Amir Yaron and reviewed by Calcalist, some 20 fintech companies including BTB, Credorax Inc., Articode Ltd., and Cash-Up demanded access to the financial data of customers with accounts in Israeli banks.


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Currently, private account information is available only to customers and their bank and cannot be accessed by other financial players. In the letter, the companies asserted that providing them with access to the requested data will help them offer consumers market-encompassing price comparison services.


Bank of Israel Governor Amir Yaron. Photo: Amit Sha'al Bank of Israel Governor Amir Yaron. Photo: Amit Sha'al



The demand is based on a law intended to increase market competitiveness, passed by the Israeli parliament in 2017. According to the letter, as well as to two people familiar with the matter who spoke to Calcalist on condition of anonymity, the companies claim that the bank is making no effort to comply with the law.


The bank has received the demand and will provide the companies with an answer, a spokesperson for the bank told Calcalist Thursday.


The companies further stated that according to the 2017 law, they were to receive, as a first step, access to a read-only database, but no significant headway has been made in that regard since the law was passed. It seems, the letter states, that the Bank of Israel has decided not to comply with the law and skip over the read-only phase, which would’ve increased the market’s competitiveness earlier.


The read-only interface was supposed to be made available by mid-2018 but has yet to be put into motion. In August, the Bank of Israel announced it will offer an application programming interfaces (API) protocol intended to provide fintech companies with easier access to databases, but the bank estimated the infrastructure will not be ready before 2021.


A similar reform in Europe took seven years to complete, which is why the law included temporary provisions, such as the read-only access, intended to increase market competitiveness sooner.


Speaking on conditions of anonymity, two Bank of Israel executives told Calcalist that there is unanimous agreement among all relevant authorities—the ministries of finance and justice, the Capital Market and Insurance Authority, and the bank itself—that the read-only clause is rife with risk and should be rewritten as part of the work on the API protocol. The bank opposed the law when it was passed in 2017.


Another complaint raised by the fintech companies is lack of communication with the Bank of Israel’s banking supervision division, which has led them to believe that the protocol currently being set up would not necessarily fit their needs. As long as the supervision division does not intervene, banks in Israel will have no incentive to cooperate with fintech companies which act as competitors to traditional banking institutions, they said.



Another issue concerning players in the fintech industry is the recent recommendation to establish a regulatory sandbox for fintech startups, intended to provide companies with a way to operate without creating risk in the market. The Israeli ministry of finance published a call for information on the issue in August 2017, but when the inter-ministerial team published its recommendations in February, many of the local players were disappointed to find out the team did not outline a clear regulatory framework.


According to the Israeli Ministry of Finance, there are around 400 home-grown fintech companies, but only a few of them provide their services locally. Many companies in the field cite regulatory difficulties as their reason for avoiding the Israeli market.
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