Sources inform ''Globes'' that VeriFone Holdings Inc. (Nasdaq: PAY) is considering entering the Israeli credit card clearing market. VeriFone, whose Israeli operations are run by EVP and COO Lazy Yanay, decided to seriously examine the possibility of entering the Israeli credit card clearing market after Antitrust Authority director general David Gilo's decision in August to remove some of the sector's entry barriers. If VeriFone enters the market, it will be the first time that a company that is not a credit card company will begin large-scale clearing in the Israeli market.
VeriFone said in response, "VeriFone welcomes the Antitrust Authority director's decision. However, VeriFone cannot yet comment on future steps before we receive and study all the relevant material and details, after which we will decide on our next steps."
Israel's credit card clearing market is currently controlled by the three credit card companies: Isracard Ltd., Leumi Card Ltd., and Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa). The clearer collects the money from the issuer of the credit card and transfers it to the business, usually charging a commission derived from the size of the charge. The average commission is 2.5%, and small businesses usually pay a larger commission than retail chains.
The credit card market is growing. Credit card transactions totaled NIS 215 billion in 2012, and are projected to grow by 7% in 2013. In other words, annual income from clearance is over NIS 2 billion. Despite the sector's growth, no new companies have entered either the credit card or clearance sectors, and they are still controlled by the three credit card companies. Gilo decided on steps to encourage new companies to enter the clearance market.
Gilo has notified Automated Banking Services Ltd. that it must greatly change its operations to allow new companies to link up with its systems cheaply and easily within two years. The company, which is owned by Bank Hapoalim (TASE: POLI), Bank Leumi (TASE: LUMI), Israel Discount Bank (TASE: DSCT), and First International Bank of Israel (TASE: FTIN), owns the only computer system through which credit card transactions are carried out. It is not possible to work in the market without working with the company.
Gilo ordered Automated Banking Services to allow new companies to be connected to it at a cost of up to NIS 400,000 (compared with the company's current charge of millions of shekels). It will also have to support international technology standards, which will facilitate the entry of new companies into the credit card industry. He decided that the company will have to meet these standards within two years, so even if VeriFone enters the market, it will take at least two years.
VeriFone is a multinational developer of secure electronic payments systems. It has 5,000 employees worldwide, including 400 at VeriFone Israel. It has been considering expanding its Israeli operations for a long time. It once considered acquiring the ATM business that Automated Banking Services had put up for sale, and it is now apparently considering entering the credit card clearing market.
Published by Globes [online], Israel business news - www.globes-online.com - on September 22, 2013
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