Digital Payments & Fintech - Israel

The Regulation of Payment Services and Payment Initiation Law was enacted in 2023 (as part of the 2023-2024 Arrangements Law) and came into effect on 6 June 2024, setting uniform licensing requirements for entities engaging in payment services, drawing on PSD2 principles around competition, innovation and consumer protection.

The Israel Securities Authority (ISA) is the designated regulator for payment service providers and the new payment-initiation license, formulating licensing procedures covering stability, data security, business continuity and AML. The Bank of Israel retains its role as supervisor of 'systemically important payment service providers' (e.g., banks, credit card / acquiring companies).

Issuers of means of payment and acquirers whose average monthly funds received/transferred do not exceed ILS 5 million are exempt, as are entities already supervised (banks holding systemically-important payment licenses, and deposit/credit licensees). Previously-exempt or foreign providers could continue operating only if they filed a license application with the ISA and received acknowledgment by 6 September 2024.

Open banking is regulated separately under the Financial Information Services Law (2021), which licenses 'financial information service providers' (supervised by the ISA) and obliges banks/credit-card issuers to give them online access to consumer financial data, on PSD2-style principles, with phased expansion to other financial institutions.

Israel runs the ZAHAV RTGS system (live since July 2007) for large-value/urgent payments and MASAV 'Faster Payments' for real-time retail credits and transfers (settling in seconds), with the Bank of Israel also advancing request-to-pay (R2P) and, in 2025, completing migration of ZAHAV to the ISO 20022 messaging standard.

Buy-now-pay-later and other non-bank credit and credit-brokerage ('marketplace lending') systems are supervised by the Capital Market, Insurance and Savings Authority, which in February 2024 issued Financial Service-Providers Circular 2023-10-4 on operators' own-fund (nostro) investments in credit-brokerage systems, with restrictions effective from 12 March 2024.