Banking Update | January 2020
Israel is Moving to EMV
Amendment of the Proper Conduct of Banking Business Directives regarding payment cards and acquiring business
On January 9, 2020, the Supervisor of Banks has published an amendment of the Proper Conduct of Banking Business Directives regarding charge cards (“PCBBD 470”) and acquiring business (“PCBBD 472”) (the “Amendment”). In accordance with the Amendment, banks and credit cards companies are not allowed to issue charge cards that do not support EMV standard and contactless payment. In addition, according to the Amendment, acquirer is not permitted to accept non-EMV charge cards transactions. The Amendment will be implemented gradually beginning in March 2020 and ending in July 2022.
- EMV technology reduces charge cards and ATM frauds and welcomes new payment players, payments methods and innovation. Therefore, the Bank of Israel highly considers the promotion and implementation of EMV technology.
- In the commentaries of the Amendment, the Bank of Israel stated that the number of EMV transactions in Israel is relatively small, and in comparison to the world, Israel is late in the implementation of EMV technology, although steps were taken by the Bank of Israel.
Amendment of PCBBD 470
- The Amendment amends clause 22 of PCBBD 470 such that banks and credit cards companies are not allowed to issue charge cards that do not support EMV (“Smart Cards”) and contactless payment. The aforesaid requirement will not apply to certain types of cards, e.g. bank ATM cards, prepaid cards, B2B cards and other designated cards.
- This amendment is effective as of March 31, 2020.
Amendment of PCBBD 472
- The Amendment adds clause 14A to PCBBD 472, which stipulates as follows:
- An acquirer shall not accept non-EMV transactions.
- To the extent a card-present (CP) transaction is made with a Smart Card, the acquirer is permitted to accept the transaction only if it is an EMV transaction and the cardholder enters his PIN code or uses another strong customer authentication (the “Authentication Requirement”). The issuer or the acquirer may decide that certain CP transactions will not be subject to the Authentication Requirement. In respect of contactless transactions, in the commentaries of the Amendment, the Bank of Israel stated that it was agreed that contactless transactions under certain amount would not require the entering of a PIN code.
- The Bank of Israel has decided of a gradual implementation of the revised PCBBD 472 due to the complexity of the technology and the need of market education. Therefore, the amended PCBBD 472 will come into effect as follows:
|Effective Date||Merchant Type|
|1.||November 30, 2020||(A) Physical merchants with CP transaction volume in 2019 of NIS 100M or more, except for (i) gas stations; (ii) merchants which seventy-five percent (75%) or more of their volume are made with CNP transactions.
(B) Any merchant with an installed EMV POS as of the date of the Amendment.
(C) Any merchant which begin accepting charge cards on the date of the Amendment or thereafter.
|2.||July 31, 2021||Merchants not listed in row #3 below.|
|3.||July 31, 2022||Merchants which ninety percent (90%) or more of their volumes are made with CNP transactions, and gas stations.|
 Prior to the Amendment, banks and credit cards companies were not allowed to issue charge cards, other than bank ATM cards, unless such cards supported EMV.
 Card Not-Present transactions.
For more information please contact your GKH attorney, Adv. Ofer Hanoh, Partner and head of the Banking, Insurance and Financial Regulation Department (Ofer@gkh-law.com) or Adv. Ido Amir, Partner (IdoA@gkh-law.com).