How people pay in Israel
Israeli payments are split across instruments whose value ranges don't overlap. The reference source is the Overview of the Payments System in Israel, published by the Bank of Israel in August 2024. In 2022, cards accounted for 73.5% of the country's transactions but only 2.7% of their value. The gap comes down to ticket size. Cards are used for retail purchases, while large amounts go by check, direct debit, or RTGS. Card acceptance is therefore the first thing a merchant entering this market has to deal with. Its components (switch, terminal protocol, credit schedule) are all Israeli.
Card payments are small on average. From 2014 to 2022, about 75% of card transactions were under ₪200 (Bank of Israel, 2024). Cards replaced cash for these low-value purchases, a shift that was far from certain a decade earlier. The technical transition came late: the final EMV migration milestone for merchants was only reached in July 2022. More than 99% of terminals had been upgraded by April 2023, and noncompliant cards stopped being accepted on December 31, 2024.
| Instrument | Share of value | Share of transactions | What it means for an operator |
|---|---|---|---|
| Zahav (RTGS) | 57 % | 0,07 % | Large-value payments and final settlement; individuals can use it too, at low cost |
| Masav credit transfer (direct credit) | 26,6 % | 10 % | Salaries, pensions, suppliers; the bulk credit rail |
| Masav direct debit | 7,2 % | 9,9 % | Subscriptions and utilities, for everyday amounts |
| Checks | 5,2 % | 2,7 % | Still alive on the business side, often postdated and discounted |
| Payment cards | 2,7 % | 73,5 % | Retail, with very small tickets; the home turf of acquiring |
| Cash withdrawals | 1,3 % | 4 % | Average withdrawal of ₪1,242 in 2022; cash holds its ground on ticket size |
The check remains a high-value instrument, used mainly by businesses. In 2022, Israeli checks totaled about ₪816 billion, with an average value of ₪11,044 (Bank of Israel, 2024). The postdated check serves as supplier credit and can be discounted, much like a bill of exchange. Digitization is moving fast: 46% of checks were deposited through a mobile app in 2022, up from 6% in 2018.
Shva: one switch, and only one
Shva (Automated Bank Services Ltd.) is Israel's national switch: it routes card transactions between merchant terminals, gateways, acquirers, and issuers, and handles daily settlement among them. It also runs the ATM switching network. No other operator performs this function in Israel, whereas other markets split switching among several competing networks. Every Israeli card transaction therefore goes through the same chokepoint.
Switched volume runs into the billions of transactions. In 2022, Shva's switch processed 2.03 billion debit transactions worth ₪433.4 billion, plus 20.6 million credits and cancellations (Bank of Israel, 2024). On the ATM side, 44.7 million interbank withdrawals worth ₪45.6 billion went through the same operator that year. Published availability was 100% in 2023 for both the card system and the ATM system.
Shva is no longer controlled by the banks that use it. The 2017 Strum Law barred banks from controlling an interface system operator or holding 10% of any class of means of control. Shva was therefore listed on the stock exchange, and the banks' stakes fell below 50%. The Governor canceled its joint service company license at the end of May 2022 (Bank of Israel, 2024). A separate project is splitting Shva from Masav, as requested by the Competition Authority in October 2019.
Tashlumim: in Israel, the card is a credit instrument
The dominant card in Israel is the deferred debit card. The cardholder makes purchases during the month, the issuer aggregates them, and the account is debited once. Tashlumim, the splitting of a purchase into monthly installments, was built on this foundation. It is offered by default at the register and on almost every Israeli checkout page, and the cardholder chooses the number of installments when paying. A merchant offering without tashlumim falls short of Israeli retail norms.
The Bank of Israel explicitly distinguishes two ways of financing tashlumim. In the first, the credit is borne by the merchant, which grants the deferral itself, from a few days to a few months, and carries the funding cost. In the second, the credit is borne by the customer, to whom the card company lends over several months, sometimes more than a year, through its credit programs (Bank of Israel, 2024). Both look the same to the cardholder, but they do not have the same effect on the merchant's account.
| Card type | Cardholder debited | Merchant credited | Operational note |
|---|---|---|---|
| Deferred debit (the standard) | Once a month, installments included | On dates agreed with the acquirer | Backed by a credit line from the issuer; not available to anyone without one |
| Immediate debit | When the transaction is executed | Within three business days | Directive 470 (June 2015): issuer to acquirer within two business days, acquirer to merchant within three |
| Prepaid | When the card is loaded | Within three business days | Cash substitute, usable without a bank account and by minors |
| Revolving | Monthly limit set by the cardholder, balance carried over | On agreed dates | The carried balance bears interest; it is the only one of the four where credit is explicitly charged for |
Tashlumim affects an international merchant's payment stack in two ways. First, the displayed price must be splittable into installments, with the gateway passing the number of installments in the authorization message, while the order system records a single payment. The second effect concerns refunds: canceling an installment sale does not automatically cancel the remaining installments at the issuer. The merchant's customer service team must be able to explain this to the cardholder. Reconciliation is done on the total sale amount, not on individual installments.
Card market reform
Three companies issue and acquire most Israeli cards: Isracard Ltd., Max IT Finance Ltd., and Israel Credit Cards Ltd. (CAL). They carry five brands: Visa, Mastercard, American Express, and Diners, alongside Isracard, a local brand (Bank of Israel, 2024). All three were once owned by banks. The card market reform broke that link, one company at a time.
The separation stems from the law of January 31, 2017, the Increasing Competition and Reducing Concentration in the Banking Market in Israel (Legislative Amendments) Law, 5777-2017, known as the Strum Law. It bars banks holding more than 20% of total Israeli banking assets from issuing cards or acquiring transactions. The law implements the recommendations of a committee set up in June 2015 by Finance Minister Moshe Kachlon and Bank of Israel Governor Karnit Flug and chaired by attorney Dror Strum, a former Antitrust Commissioner.
The sale of CAL is the last step in this separation. On September 19, 2025, Discount Bank's board approved the sale of its entire stake to the Union Harel group, for total consideration capped at ₪4 billion. Discount's share comes to up to ₪2.87 billion, including ₪2.69 billion fixed and about ₪180 million contingent on performance, and the group will own about 72% of CAL. First International Bank of Israel has an option to sell its own stake to the same buyer on a pro rata basis (Discount Bank press release, 2025). Closing is subject to regulatory approval.
The reform's second lever is price. The cross-commission is Israel's interchange fee: the Bank of Israel sets the rate, rather than the schemes negotiating it. The published schedule lowers the deferred debit rate from 0.7% to 0.5% in three steps: 0.6% on January 1, 2019, 0.55% on January 1, 2021, and 0.5% on January 1, 2024. Immediate debit entered the schedule at 0.3% and is on a path ending at 0.25% (Bank of Israel). The projected savings for businesses ran to hundreds of millions of shekels a year.
| Transaction | Rate | Basis | What it means for a merchant |
|---|---|---|---|
| Deferred debit | 0,7 % → 0,5 % | Three steps, ending January 1, 2024 | The general case: this rate applies to almost all retail card payments |
| Immediate debit | 0,3 % → 0,25 % | Path set by the Bank of Israel | The regulator makes immediate debit structurally cheaper than deferred debit |
| Gap between the two | 0.25 percentage points, eventually | – | A mix weighted toward immediate debit lowers acceptance costs, but the card base has not caught up yet |
Zahav, Masav, and instant payments
Zahav, Israel's RTGS system, run by the Bank of Israel, handles final settlement for every position in the country. That includes the Shva and Masav systems, the check clearing house, and the Tel Aviv Stock Exchange clearing houses. In 2022, it settled 1.906 million transactions worth ₪353,175 billion. The system had 20 settlement participants in August 2023 and 99.905% availability in 2023 (Bank of Israel, 2024).
Zahav stands out because individuals and small businesses can access it. Since February 2015, banking fee rules have capped the charge for a transfer of up to ₪1 million at the price of a teller transaction, or ₪6. Volumes reflect this: customer transactions grew about 82% between 2018 and 2022. A final, irrevocable transfer therefore costs an Israeli customer ₪6, whatever the amount up to that cap.
Masav (Banks' Clearing Center) runs Israel's ACH, the clearing house for bulk credit transfers and direct debits. Its credits, debits, and transfers system handled ₪5,298 billion across 539.5 million transactions in 2022, with credits making up about 78% of payments settled (Bank of Israel, 2024). Salaries, pensions, and subscription debits run through it. The beneficiary can reject a credit cleared through Masav within three business days, whereas a credit sent through Zahav is immediate and final. That difference in finality drives the choice of rail for payouts.
Masav has run Israel's instant transfer rail since 2020, when it handled 1 million transactions worth ₪149 million. In 2022, it handled 5.1 million transactions worth ₪13.2 billion, about 2% of Masav transactions. In 2023, it reached 6.7 million transactions worth ₪25.5 billion, up 31% in number and 93% in value from the previous year. Not every bank lets customers send instant transfers, but every bank must be able to receive them.
Bit, Paybox, and payment apps
Israeli person-to-person payments grew up inside three bank apps: Bit (Bank Hapoalim), PayBox (Israel Discount Bank), and Pay (Bank Leumi). In July 2021, the Israel Competition Authority published its P2P Transfer Apps market study, which found that in 2020 Bit handled most transactions in the category, by both number and value, and that its position was strengthening. The report recommended considering mandatory interoperability between apps (Knesset Research and Information Center, October 2021).
Volumes have surged since. According to Shva data, the value flowing through wallets and apps more than doubled in 18 months, from about ₪2.4 billion in Q1 2020 to about ₪5.4 billion in Q3 2021, while their share of all transactions rose from 2.7% to more than 5%. For wallets in the strict sense, the Bank of Israel measured a more than thirteenfold increase between July 2021 and July 2023. Monthly volume rose from ₪274.6 million to ₪3.586 billion, or 8.71% of card transactions.
The shift toward merchant payments shows in the numbers. In 2020, the Bank of Israel measured ₪13.8 billion flowing through the apps, 88% of it between individuals and only 8% to businesses, with an average transaction of ₪236. The October 2023 survey of Bit and Paybox found that 42% of funds went to businesses. Within three years, apps designed for person-to-person transfers had become a merchant collection channel, and fees are the main complaint of the merchants surveyed.
These apps were opened up by a Competition Authority decision: its June 2020 exemption set two rules. The five largest banks cannot refuse, without reasonable cause, to sponsor a payment service provider. None of them can use the instant rail for its own app until it has sponsored a nonbank provider that actually uses the rail. The Bank of Israel later authorized Bit to become a wallet open to customers of other banks.
Licenses, supervisors, and system access
The legal framework rests on four statutes. Section 4 of the Bank of Israel Law, 5770-2010 makes the central bank responsible for regulating payment systems. The Payment Systems Law, 5768-2008 defines payment systems and establishes settlement finality, empowering the Governor to declare a system controlled or designated controlled. Amendment No. 18 to the Banking (Licensing) Law, 5741-1981, passed in August 2011, prohibits acquiring transactions without a license from the Governor. The consumer protection regime comes from the Payment Services Law, 5779-2019.
The Payment Services Law took effect on October 14, 2020, repealing the Payment Cards Law, 5746-1986. It draws on the EU directive while keeping protections from Israeli law. Customers can ask for a payment instrument to be frozen for up to two weeks, and can dispute a transaction and receive a conditional credit, including for card-not-present transactions. A standing order unused for two years is canceled automatically. When several providers are involved in a failed transaction, they are jointly and severally liable, and the customer can turn to whichever one they choose.
The second tier came with the Regulation of Payment Services and Payment Initiation Law, 5783-2023, published on June 6, 2023, and in force since June 6, 2024. It establishes the licensing regime for nonbank firms, supervised by the Israel Securities Authority (ISA), including acquirers that are not prudentially supervised. Acquirers already licensed by the Bank of Israel had six months to file an application with the ISA. The law also creates payment initiation services, and an amendment to the Wage Protection Law, 5718-1958 allows wages to be paid into an account held at a payment company.
| Authority | Scope | Governing laws |
|---|---|---|
| Bank of Israel, Payment and Settlement Systems Department | Oversight of controlled systems, participant access, operation of Zahav | Bank of Israel Law 5770-2010, sec. 4; Payment Systems Law 5768-2008 |
| Bank of Israel, Banking Supervision | Acquirer licenses, banks, card companies, cross-commission, conduct directives | Banking (Licensing) Law 5741-1981, amend. 18; Banking (Service to Customer) Law 5741-1981 |
| Israel Securities Authority | Licensing of nonbank providers, payment initiation, financial information services | Regulation of Payment Services and Payment Initiation Law 5783-2023; Financial Information Service Law 5782-2021 |
| Capital Market, Insurance and Savings Authority | Financial asset service providers, and deposit and credit unions connected to the systems | Agreement with the Bank of Israel of September 28, 2022 |
| Israel Competition Authority | Banking concentration, Shva/Masav separation, restrictive arrangement exemptions | Strum Law 5777-2017; June 2020 Masav exemption decision |
Open banking follows its own track. The Financial Information Service Law, 5782-2021, published on November 4, 2021, requires institutions that hold customer data to share it via APIs with licensed financial information service providers. These providers are supervised by the Israel Securities Authority, while data holders stay under their own supervisors. The ISA granted its first licenses to fintech companies on September 28, 2022. The data in scope covers balances, fees, interest, transactions, overdrafts, savings, and securities.
Entering as a foreign acquirer or payment provider
Israel's controlled systems have been open to foreign firms since 2023. On February 28, 2023, the Bank of Israel granted access to holders of a payment services license issued by a recognized country. Regulations issued by the Finance Minister set the list, which is limited to the UK, the EU member states, and the US. The framework relies on the license exemption in Israel's financial asset services regulations. There are two routes.
| Route | Conditions | What it enables |
|---|---|---|
| Test environment | Meet the conditions of the license exemption | Connect to the systems and run tests, with no live activity |
| Production environment | At least two years of operation after obtaining the home-country license and a base of at least 5 million customers, plus additional conditions | Operate live in Israeli systems under the foreign license |
| Common requirement | Approval by the Governor of the Bank of Israel | The final step before going live, whichever route is chosen |
A further easing came in November 2023, during the war. International acquirers licensed in the UK, the EU, or the US can start connecting to the test environment of Shva's card system. They can do so before any acquiring activity, and even before applying for an Israeli license. The stated goal was to shorten time to market. Technical connection and license review can therefore run in parallel.
Domestic acquiring opened up at the same time. Tranzila obtained a settlement license in 2017 and Cardcom in 2018, before banking supervision introduced a simplified procedure with much lower capital requirements. Permanent acquirer licenses were granted in 2023 and 2024 to CardCom Settlements Ltd. and Tranzila Ltd. A temporary license went to Upay Finance Ltd. (Bank of Israel, 2024), and these licensees moved under ISA supervision in June 2024.
- Nonbank providers connected or connecting: “Grow” by Meshulam Payment Solutions Ltd., Global Remit Currency Services Ltd., A.T.M.S Matrix Ltd., Neema Shefa Ltd., Rewire ASG (Remitly group), GMT Tech Innovation Ltd., V-Check Ltd., Revolut Ltd., and 019 Payment Services Ltd. (Bank of Israel, 2024).
- New banks: Esh Bank received a temporary license in December 2022 and connected to Zahav in November 2023; Ofek, a deposit and credit union, is still working on its connection under the supervision of the Capital Market Authority.
- Closed-loop loyalty clubs: since June 19, 2022, these programs can connect directly to Shva's card system and accept payments on existing terminals instead of deploying their own infrastructure.
- Remittances by foreign workers: a separate segment served by the Postal Bank, licensed money changers, and specialist firms; the amendment to the Wage Protection Law allows wages to be paid into a payment account in this segment.
Open projects: the digital check and the digital shekel
Two projects shape Israel's payments agenda for this decade. The first targets checks, which remain high in volume and costly to process. The Bank of Israel is developing a digital debit order, presented as the replacement for the paper check. The new instrument keeps the check's economic features: it can be postdated, endorsed, and discounted. The cost of paper shows up in returns. In 2022, 2.27 million checks were returned, with technical rejections totaling ₪32.1 billion, or 4.3% of cleared checks, and 81% of returns caused by the paper itself.
The instrument's economic value benefits both parties. For the customer, a postdated debit order preserves interest-free credit that does not count against their credit line. For the supplier, it preserves endorsement and discounting, two financing mechanisms heavily used in Israel, while eliminating rejections for a missing signature or an incorrectly written date. The Bank of Israel notes that 99% of postdated checks are cashed on the date written.
The second project is the digital shekel. On March 3, 2025, the Bank of Israel published the Preliminary Design for the Digital Shekel System, open for public comment until May 15, 2025. The model is two-tiered: the central bank issues, while DS-PSPs (digital shekel payment service providers) connect end users. Funding institutions and additional service providers operate alongside them. DS-PSPs do not hold customer funds, which justifies lighter regulation and opens the role to nonbank firms.
A third project underpins the other two. The ISO 20022 migration of Zahav messages began in March 2023 and was completed in July 2025, ahead of SWIFT’s November 2025 deadline. Since that deadline, SWIFT participants have had to send messages in the new format, although SWIFT does not require RTGS systems to migrate. The Bank of Israel went ahead anyway, to align its financial market with the standards its correspondents are adopting. As early as March 2021, Masav and its participants were instructed to adopt ISO 20022 in full. The deadline therefore also applies to the format sent by a foreign institution itself, not just to that of its Israeli counterparty.