Daily Israel Report

MKs: 'Internet Bank' Could Make Banking Cheaper

The government's next target for encouraging competition is in the banking sector, and an internet bank might be the way to do it
By David Lev
First Publish: 5/14/2013, 3:15 AM

Bank
Bank
Flash90

After long distance companies, cellphone service providers, and car importers, the government's next target for encouraging competition is in the banking sector. Currently, two banks – Hapoalim and Leumi – have 60% of the banking business, and efforts until now to change that number have more or less failed.

The latest idea, discussed Monday by the Knessett Economics Committee, is the establishment of “internet banks” - financial institutions where all business would be done on-line. Speaking at the Committee was David Zaken, the Treasury's Banking Supervisor, who established a committee to examine the viability of the project.

“Beyond over-concentration of the industry in the hands of a few organizations, there is a problem of very high salaries being paid out relative to the situation in other countries,” Zaken told MKs. This is one reason why banks earn less here, and charge their customers more for services than in other places. “Increasing the number of companies in the banking space will bring about more competition,” he said, adding that the institutions did not have to be banks specifically. “Credit unions, for example, could help customers get credit, and the opening of internet banks would also increase competition for business, lowering costs for households and small businesses,” he said.

Several of the changes the group is proposing requires legislative changes, he added.

MK Avishai Braverman (Labor), chairman of the Economics Committee, said that “the anger of the public stems from two reasons: The difficulty of dealing with credit providers, and the high cost of bank fees. Moving accounts between banks is also difficult and onerous. There is no doubt that we need new cooperative ventures that will provide credit, as takes place abroad, as well as internet banks.”