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
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
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.