For the first time, the Bank of Israel is allowing customers to execute transactions on their accounts via the Internet. Supervisor of Banks Yitzhak Tal sent a special circular on the matter to the banks today.
Up to now, the Supervisor has refused to allow account activity via the Internet, because of fears concerning the level of security on the Web. Therefore, for the past two years, customers could only obtain information on the state of their accounts via the Internet, and not operate the account.
The transactions now permitted are investment transactions with money from the same account only. Thus, transactions involving investment in securities, transfer from a current account to a term deposit or saving scheme, and so on, are permitted.
In some of these activities, the banks have been in an inferior position, after several private brokers opened online trading services (direct securities trading by the customer vis-a-vis the stock exchange computer). Elsewhere in the world, this service has enjoyed great success, thanks to the ability of private customers to trade for themselves, and thanks to the relatively low commissions charged for the service. It has already changed the face of securities trading in the US, leading the development of the day trade phenomenon. Today’s directive from the Supervisor will enable the banks to fall into line with the private brokers in the area of online trading.
Because of the banks’ high level of accessibility to their customers, the development of online trading on the banks’ computers is likely to boost online trading in Israel. This could have far reaching consequences for the nature of trading on the Tel Aviv Stock Exchange, and on the commission rate charged customers for securities transactions. This is particularly true of small customers, who up to now have tended to pay relatively high commissions.
However, the Supervisor of Banks is still not enabling inter-account transactions to be executed via the Internet, in the light of the security risk in transactions of this kind.
The banks have expected the Supervisor’s announcement for some time, and most are ready to put it into effect almost immediately. On publication of the Supervisor’s announcement today, Bank Hapoalim and Bank Leumi were quick to announce the imminent start of this service on their computers. The other banks will also shortly announce the inauguration of Internet banking services.
Published by Israel's Business Arena on March 17, 1999