Source: Bank of Israel
As part of the numerous steps being led by the Bank of Israel and the Ministry of Finance to enhance competition in the financial system, a new system will be launched on September 22, 2021.
The system enables banking system customers to switch from one bank to another—online, conveniently, and securely, at no cost and within 7 business days. In addition, after switching the activity and automatically closing the old bank account, to the extent that additional activity remains, the credits and debits that reach the old account will be automatically forwarded to the new account (“Follow me” service).
This complex system, which was developed over more than 3 years by the banking system, through, among others, Masav as the project’s main factor, markedly simplifies the existing process of switching, and will enable customers to improve their account terms vis-à-vis the banks.
Minister of Finance Avigdor Liberman said, “Rapid transfer from one bank to another is an important step and an integral part of the policy of enhancing competition that we have adopted in various industries. The transfer is carried out at no cost in order to make the service accessible to all the State’s citizens. We will continue working to reduce bureaucracy in significant focal points that impact on, and ease, our daily conduct.”
Governor of the Bank of Israel Prof. Amir Yaron said, “Completing this step is another stage on the way toward an open, transparent, and more competitive financial system that we are promoting on several fronts, and that will enable customers to easily and conveniently choose the providers of the various financial services they use. We will continue to utilize the digital age available to us in order to advance processes and reduce barriers in the financial system and in the payment systems. The system was established after diligent work and the investment of considerable resources at the Bank of Israel, together with the Ministry of Finance, Masav, and the various banks, and I would like to commend all the partners in this work.”
Supervisor of Banks Mr. Yair Avidan said, “Launching the online system for switching banks is a significant step in enhancing competition in the financial system, and joins additional steps that we are leading with the goal of encouraging competition, for the benefit of the public. The option to switch banks very easily, securely, and at no cost, will strengthen both customers’ negotiating position in negotiating with the bank regarding improving the account management terms, as well as the competition among banks for the service. We will continue to lead additional steps with the goal of making things easier for the public in their conduct vis-à-vis the bank.”
In March 2018, an amendment to the Banking (Service to the Customer) Law, 5741-1981, was passed, which requires the banks, at the customer’s request, to act to enable the customer to move his or her activity from the bank in which the account is managed to another bank in an online, convenient, and secure manner, at no cost. The online system will make it possible to switch Israeli households’ current accounts in a convenient and friendly manner, other than accounts with a complicated issue or that have some legal hold against them , and thus will markedly simplify the current complexity of the switching process between banks.
The process of switching the account shall take place within 7 business days. Within such process, it will be possible to switch the following financial activities: credit balances in shekels and in foreign currency, debit balances in shekels and in foreign currency, authorized debits of a current account, checks, securities (Israeli and foreign), payment card—bank and nonbank—activities, and standing orders.
With regard to loans (including housing loans), and with regard to deposits and savings, special arrangements were made, according to which the banks will work on an individual basis with the customers regarding the handling of such products.
With the goal of easing things for customers, the process of switching banks through the system will also allow a “Follow me” (routing) mechanism for two years from the date of the switch. This means that transactions that arrive at the old account after the switch, will be automatically routed to the new account, in contrast to the current situation in which all debits and credits are returned because the account is closed, and the customer must contact the various entities that are crediting or debiting the account.
In order to simplify the process, for any issue that arises during the process of switching banks, customers will have one address—the new bank—which the customer can contact about any issue. It is also noted that in a case of failure in the switching process or the “Follow me” mechanism, it will be the new bank’s responsibility within the framework of legislation that is currently being promoted by the Ministry of Finance.
Submitting a request for transferring between banks will be possible via the banks’ websites (via home computer or mobile device) as well as at bank branches.
Note that the transfer between banks through the system will be possible among all the banks in the banking system except for Union Bank, which is expected to be merged with Bank Mizrahi Tefahot, and Bank of Jerusalem, in which the number of customers managing a current account is very low, both in absolute number of customers and in regard to the bank’s share of the system. Customers of those banks who are interested in switching their financial activity to another bank, will still be able to do so via the current mechanism as determined in Proper Conduct of Banking Business Directives no. 432 on “Transferring activity and closing a customer’s account” and no. 439 on “Debits by authorization”.
With regard to the first digital bank, switching to it through the online system will be possible as of April 1, 2022, as the bank is still in the stage of being set up, which is expected to end by that date.