Israel Introduces Banking Compliance Checklist for Payment Companies
Regulatory Framework for Payment Companies
Israel has finalized a reform to establish a dedicated regulatory framework for payment companies, aligning with global standards in this sector. The “Payment Services and Payment Initiation Act of 2023” designates the Israeli Securities Authority (ISA) as the primary regulator of payment companies’ activities.
Supervisory System Led by ISA
The law provides the legal foundation for establishing a supervisory system led by the ISA, which will set regulations to govern the implementation of the reform. Companies providing one of the designated “Payment Services” must obtain a Payment Service Provider license from the ISA.
Exemptions and Transitions
The law grants specific powers to the Finance Minister to determine regulations that provide exemptions for entities operating on a limited scale, including those offering payment services with restricted amounts or transactions. Entities currently supervised by the Capital Market, Insurance, and Savings Authority (CMISA) will transition to ISA supervision, while companies providing credit and currency conversion services will be supervised by both CMISA and ISA.
License Application Deadlines
Companies required to obtain a license must submit applications by specific deadlines:
- September 2024 for those without prior licenses
- December 2025 for CMISA-licensed entities
- December 2024 for acquiring license holders
- Foreign corporations with payment service licenses from the EU, US, and UK are exempt until June 2024
Assessment Criteria
The ISA will assess applicants’ technological means, expertise, information security infrastructure, cyber security, risk management, business continuity, financial means, equity capital, insurance coverage, and qualifications of controlling shareholders and officeholders. A minimum level of capital requirements and other prudential regulation requirements will be set by the ISA in its guidelines.
Impact on Payment Services Market
The reform is expected to revolutionize the payment services market, enabling a regulatory regime that fosters a competitive, sophisticated, and advanced payment market rooted in technology, with diversified payment methods and solutions tailored to customer needs.