Israel begins first phase of Open Banking reform

This initial step is expected to be followed by the ability to share all customer data, including loans and stock holdings, with the customer’s approval. The reform, its supporters hope, will enable greater competition among suppliers of financial services. This is because, with customers’ financial information readily available, financial bodies will be able to offer suitable products to potential customers, and those looking for a financial service will have an easier time shopping. The reform also is critical for the development of fintech companies.

Israel’s banking sector suffers from a chronic lack of competition, but recent efforts are showing some results. A new bank called The First Digital Bank launched in March 2021, becoming Israel’s first new bank in more than 40 years. The new bank comes on the heels of a bill passed in 2017 intended to increase competition in the country’s banking industry. A significant barrier to getting into the banking business is the high cost of building the necessary computer infrastructure. The law importantly directed the government to build such an infrastructure that will then be available to entrepreneurs to rent, thus helping new players enter the market. This infrastructure was built and it began to operate in March 2021 alongside The First Digital Bank.