Israel’s credit card industry is on the brink of a revolution, to judge from a draft decision which Restraint of Trade Commissioner David Tadmor sent to the credit card companies. The draft includes regulations governing their activity, as well as declaring them to be a monopoly.
The companies have 30 days in which to respond to the decision, before Tadmor asks the Restraint of Trade Court to declare the monopoly.
Tadmor’s decision, and the regulations he will promulgate covering activity in the sector, are based on his assessment that there is no competition whatsoever in the credit card industry, and conditions must be created to foster competition both in the area of card issuance and in the area of payment clearance. The planned regulations are expected to lead to a revolution in the industry, like the reform introduced in Britain’s credit card industry in 1989.
In the area of the issuing of credit cards, Tadmor has decided that all the banks will issue all the credit cards on equal terms, including the issue of Bank Hapoalim’s Isracard and Mastercard by Bank Leumi, Discount Bank, and the other banks, and the issue of ICC-Visa and Alphacard, when it is issued, by Bank Hapoalim and the rest of the banks. The assessment is, therefore, that, in future, many more Israelis will hold more than one credit card.
In the area of clearance, Tadmor has decided on a list of regulations which will lead to competition between issuers for businesses, which will, in turn, eventually lead to lower commissions.
In practice, Tadmor has opened up the Israeli credit card market to full competition, with no more exclusivity or ownership of card brand names, even for Bank Hapoalim, in whose name Isracard is registered.
Alphacard reacted with satisfaction, pointing out that they will start issuing the new card just when the companies in the industry begin applying the order. ICC-Visa said that, in their estimation, the structural change in the industry is welcome.
Industry sources said that what is at hand is a change in the world-order, as there will no longer be any connection between the issuer and the clearer. The profits of the credit card companies will come from their commission, while the clearer's profit will come from the clearing charge, with all the banks able to act as clearer for any card.
Isracard had no comment.