Intended to Increase Competition, Israeli Law Pushes Credit Card Fees Up
In 2017, the Israeli parliament passed a law intended to increase competition in the financial sector. Among its clauses, the law mandated a separation between Hapoalim and Leumi, Israel's two largest banks, and their credit card subsidiaries
Raheli Bindman and Lilach Baumer : 2019-07-08T17:01:10..
When the Israeli parliament passed in January 2017 a law intended to increase competition in the financial sector, critics were quick to warn that the restrictions placed on local players would end up carried over to the public in the form of increased fees. Back then, experts focused primarily on consumer interest, but today, it is evident that the first fees to jump are credit card fees. instead driving talented managers away into the arms of the private sector. Last week, Israel Securities Authority (ISA) Chairwoman Anat Guetta referred to the resignations, stating that every regulatory decision has both benefits and costs, the departures being just one of the prices the public will pay for extraneous regulation. Smart regulation needs to consider all possible ramifications in advance, she said. The 2017 market competitiveness law led to an increase in the commission Isracard and its rivals are required to pay to credit card payment processing services. At the same time, though the banks were forced to sell their credit card subsidiaries in an attempt to increase market competitiveness, they were not barred from developing their own payment alternatives, such as Leumi's Pepper Pay, Poalim's Bit, and Discount's Paybox, which compete with the now independent credit card companies. The bottom line, at least for the time being, seems to be that the law that aimed to make the credit card companies equal players to the banks has failed to achieve its objectives. The financially stable continue to receive comfortable interest rates from the banks while the less financially secure are forced to turn to the credit card companies for loans at higher interest rates. And in the meanwhile, the public is paying the price in the form of increased fees.