Israel Central Bank Statement

Author: | Published: 19 Oct 2018
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Banking in Israel and abroad is changing dramatically, influenced by the rapid technological changes in the financial world and by consumer demand. The Banking Supervision Department (BSD) at the Bank of Israel sets the goals for advancing the digital transformation of Israel's banks.

There are areas of banking where technology has rendered many employees superfluous: banking applications have replaced many of the payment actions that were executed by employees. The banks are making investment counselling and portfolio management fully or partially robotic, which reduces the need for employees and makes it possible to provide investment counselling at a lower cost to a much broader population. There are also advanced technologies in various stages of development, which include blockchain technology, advanced machine learning, and image and biometric processing technology. Consumer demand for more convenient and faster digital services is spurring these changes, and technology is making them possible, empowering consumers due to the availability of information, the ability to compare prices and to monitor closely their financial status.

Therefore, in the past three years, we have been acting prudently to lead the banks in adapting their business models to the changing world of technology and to the risk management practices: encouraging the assimilation of technology (e.g., internal risk processes and client interface); removing innovation-hindering barriers; and educating the public.

Fortunately, some of the measures being advanced by the BSD are already noticeable in the field. Advanced payment applications and new and more convenient digital tools have been launched, and the Israeli public–which is used to technological innovation in many fields–has rapidly adopted them. These tools enable customers to benefit from improved convenience and accessibility to financial services, and banks to increase their operational efficiency and their financial inclusion.

Understandably these changes also challenge some customers (senior citizens, etc.) since, while technology is progressing, banks are closing branches and innovating customer interface. The BSD is therefore guiding the processes in order to minimize the difficulties and help the public to get used to the changes. It has required the banks to provide ushers in their branches to help customers use digital means, hold training sessions for customers, operate mobile branches that come to seniors' residences, and more.

Alongside encouraging change in banking, we are working on adapting the BSD to the new world of technology. We have established the new Technology and Innovation Division, hired IT professionals and enhanced the Cyber Unit, while addressing both innovation and risk management issues. The BSD endeavours to keep abreast of the dramatic changes in the banking world.

There is still a lot of work ahead of us in adjusting the banking system and the BSD to the new world of technology. Banks are slow in assimilating technological changes. In order to become more competitive, efficient and relevant to the new world of technology, they should upscale their implementation of responsible innovation and technology.