Israeli regulator: Banks block fintech competition

Michal Halperin  / Photo: Rami Zaranger

The Israel Competition Authority has published a report claiming that the banks see fintech companies as rivals and are blocking their entry into the Israeli market.

"The banks set many demands that weigh on fintech companies regarding opening bank accounts and their routine management," the Israel Competition Authority has said. "Some of the demands set by the banks are impossible to apply, delaying and even preventing the entry of fintech companies into operations in Israel and competing with the banks."

The Israel Competition Authority also criticized the Israel Capital Market, Insurance and Savings Authority, which it claims has given a relatively small number of licenses to startups focusing on financial services so that they can operate in Israel.

These claims were made today in a report to the public issued by the Israel Competition Authority (formerly the Israel Antitrust Authority), headed by Michal Halperin.

The report stressed, "In our investigation we did not find any indications that the banks have formed policies and procedures with the aim of making it difficult for rivals." But the report then continued to cite unreasonable and impossible to apply demands that effectively blocked the entry of fintech companies into the Israeli market.

The report states, "The investigation by the Authority found that the banks see the fintech companies as a competitive threat in some areas of activity. Although we are talking about small companies, some of the banks see them as rivals in various profitable areas."

The Israel Competition Authority says that the report was written after a dialogue with other regulators but the letters attached to the report's appendix from other regulators shows that the dialogue was far from productive.

Supervisor of Banks Yair Avidan writes that although he sees fintech companies as an "opportunity" and even "agrees with the statement that there a number of challenges before the fintech companies which delay the ability of these companies to develop in Israel," he really does not agree with the conclusions that the Israel Competition Authority has drawn. "We reject the conclusion that some of the typical practices of the banking system make it difficult for their business operations. We are not talking about practices but the absence of regulation and supervision designed for these companies."

The Supervisor of the Capital Market, Insurance and Savings Authority Moshe Bareket, who is criticized for not issuing enough licenses to fintech companies described the report as a mistaken narrative and that it is the Israel Competition Authority itself which is preventing competition.

Dr. Shlomit Wagman, director general of the Israel Money Laundering and Terror Financing Prohibition Authority (IMPA) also weighed in with criticism of the report. "A significant issue of substantial influence in removing obstacles in the banking system for fintech companies and their activities is the absence of effective supervision and is a risk in the regime for prohibiting money laundering and financing terror in Israel."

However, Israel Securities Authority head Anat Gueta welcomed the report.

Published by Globes, Israel business news - en.globes.co.il - on September 22, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Michal Halperin  / Photo: Rami Zaranger
Michal Halperin / Photo: Rami Zaranger
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