Sources inform ''Globes'' that Antitrust Authority director general Dror Strum yesterday ordered Israel’s credit card companies to open the market for clearing Isracard and Mastercard transaction to competition. The decision means that Israel Credit Cards-Cal Ltd. (ICC-Cal) and Leumi Card Ltd. can also issue Isracard and Mastercard credit cards. Isracard Ltd. currently has a monopoly on clearing Isracard and Mastercard brand transactions.
Strum told Isracard Ltd., ICC-Cal, and Leumi Card to initiate measures for clearing transactions for both Isracard and Mastercard credit cards in three months. The companies have until August 21 to submit objections.
The measures the credit card companies will have to implement include opening the computer interface, which was already set up three years ago, to compete in clearing transaction. The system was never used because the companies were unable to reach an agreement on clearing transactions. Strum’s new order requires the credit card companies to sign a clearing agreement identical to the agreement between Israel’s Visa credit card companies ICC-Cal and Leumi Card. This condition will make it easier to reach the necessary agreement.
If carried out, the measure will slash clearance fees paid by businesses to the credit card companies for transactions using Isracard and Mastercard credit cards. The current fee is 1.8% of a transaction.
The average clearance fee for Visa credit card transactions is 1.4%. Strum hopes that opening the market to competition will equalize the clearance fees for Isracard and Mastercard transactions to those charged by Visa i.e. a drop of 0.4%.
Businesses will be the main beneficiaries of the measure, thanks to the expected reduction in clearance fees. However, both ICC-Cal and Leumi Card will likely benefit, too. Until now, they could not clear Isracard and Mastercard transactions, and they will now have a new source of revenue.
The big loser from the measure is Isracard Ltd., owned by Bank Hapoalim (LSE:BKHD; TASE:POLI), which until now has had a monopoly on clearing Isracard and Mastercard transactions, and will now have to compete in clearing them with Israel’s other credit card companies.
Published by Globes [online], Israel business news - www.globes.co.il - on August 10, 2005