Israel Plans to Skip "Open Banking" Phase and Move Directly to an "Open Finance Sector" –
The Proposed Financial Information Services Law 2021
Dear Clients,
After a few years of procrastinating in enacting an "open banking" law, the Israeli government is now pushing forward an expedited legislation of an ambitious “(mandatory) open finance sector” system. The new law, to be titled The Financial Information
Services Law 2021, will open the Israeli market to new fintech services by both local and foreign companies.
The Ministry of Finance has attempted in the past to regulate “web scraping” access to bank accounts information, but in 2018 abandoned this approach and circulated a memo with a draft for an “open banking” law modeled on the EU's Payments Service
Directive 2 ("PSD2"). This August, the government published its final draft of the law, which by now has developed from run-of-the-mill “open banking” to an ambitious “open finance sector” initiative.
The new law will require practically all financial institutions to act as "information sources" and expose through standard Application Programming Interfaces ("APIs") not only information about “payment accounts” (current accounts)
but also information about various other financial services: transactions on payment applications; savings and other deposited funds; outstanding loans; and securities portfolios. The exposed data will include interest rates, fees, loan securities
and further relevant information for each type of financial service. The system will include both private accounts and corporate accounts.
The commercial banks, which of course provide all types of financial services for which such data is relevant, will be required to make available all such information through the standard API. Practically all other types of providers of regulated
financial services in Israel will also be gradually required to expose through similar information when providing any service for which any type of information listed above is relevant. Regulated financial service providers who will be under
obligation to expose such information include credit card companies, insurance companies and other institutional entities, credit (loan) providers, P2P lending scheme managers, brokerage firms and others.
The new law anticipates and regulates three types of use of the new "open finance" system:
- by newly licensed fintech companies which will operate as Financial Information Service Providers ("FISP") and access the data in order to provide their customers with various online services, pass on the data to financial service providers
in order to receive from them offers for financial services, and broker such services;
- by financial service providers, who may either access the data themselves or receive it from a licensed FISP, all for the purpose of offering services to customers;
- by professional, regulated “delegates”, such as accountants and tax consultants, who will be allowed to receive information from FISPs for the purpose of serving their customers.
According to the proposed law, the new system will roll out in stages from June 2022 until May 2024, gradually adding more types of information, on more types of accounts, by more types of financial service providers. Various regulators are expected
to issue regulations and guidance including specifications of the standard API (which the government anticipates will be modeled after the Berlin Group standard).
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The content in this Memo is provided for informational purposes only and does not serve to replace professional legal advice required on a case by case basis. The Firm does not undertake to update the information in this Memo, or its recipients, about any normative, legal, or other changes that may impact the subject matter of this Memo.
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