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numerous applications implicit without having to actually pur-
in the smart card, DIC can trig- chase a bank or obtain the li-
ger a major revolution in the fi- censes needed to own a bank.
They will be renewing their com-
nancial-services market.
The one stumbling block petition with the banks, not head
standing in the way of DIC is the on, but rather by turning their
fact that one of the conditions set backs on the old system and at-
down by Mondex and its owners, tacking on a totally new flank.
In any event, the DIC-Mon-
Mastercard and a group of large
British and Hong Kong banks, dex partnership offers the
is that the holder of the franchise prospect of the emergence in Is-
must be, at least in part, a com- rael, at last, of what is known as
a "non-bank bank," or a com-
mercial bank.
However, let us assume the mercial entity that conducts fi-
nancial operations traditionally
following chain of events:
1) DIC teams up with a small associated with commercial
and ambitious local bank, such banks, but that does not itself
as Israel General Bank, in order hold a banking license.
Competition from new, non-
to meet Mondex rules and win
bank players such as Aurec and
the franchise.
2) DIC succeeds in distribut- DIC is a chilling prospect for the
ing these smart cards (in which Israeli banking industry, no less
a small micro-chip is embedded, than the arrival of foreign com-
thus allowing the card to be pro- petition as formidable as MG is
grammed, much like a comput- for the insurance industry. Once
er, according to its holder's again, the loss of local companies
needs) as an alternative either and their employees and agents,
to regular cash or debit cards will be the gain of the general
(with which money is debited public, who will benefit from
immediately from the user's greater competition, lower prices
bank account) or as an alterna- and better service in industries
tive to credit cards (where pay- that have hitherto been cozy oli-
" ment is deferred until a given gopolies.
More good news for the Israeli
date). The smart cards will car-
ry the internationally recognized economy, and bad news for the
Mastercard logo. These attrib- banks, comes from a Swiss bank.
Union Bank of Switzerland, one
of that country's "big three," has
applied to become a full member
explosion
of the Tel Aviv Stock Exchange.
It would be the first foreign
in financial
member.
services.
Not to be outdone, Lehman
Brothers, the American invest-
ment bank with the longest and
utes will of course make this new strongest ties to the Israeli
card better and more desirable scene, has announced that it will
than any other card currently be the first U.S. investment
bank to be a TASE member.
available in Israel.
From the exchange's point of
3) In order to further market-
ing efforts and the distribution view this has to be one of the
of the cards, DIC will utilize and most refreshing developments
work through the well-oiled and in quite a long time, and this
extremely well-exposed retail growing interest of foreign in-
companies which it controls, stitutions will gradually, but in-
such as the Supersol supermar- evitably, change the face not only
ket chain and the Delek Fuel of the exchange itself, but also of
Company, both of which have the entire Israeli capital market.
The bigger the part these in-
outlets nationwide,
4) DIC can subsequently put ternational financial institutions
to use other branches of its far- play in the Israeli market, the
reaching empire to further fa- better it will be for the Israeli
cilitate the smooth introduction economy, the sooner the TASE
of the cards by, for example, re- will snap out of its doldrums
cruiting the aid of communica- and, of course, the better off the
tions and software companies it average traded company and in-
owns in order to build the infra- vestor will be.
The banks, however, are a to-
structure and network through
which the smart-cards will func- tally different story.
There is no doubt that when
tion.
If all these events, or indeed the big fish start splashing
even some of them, should come around in the Israeli pond, the
to pass, the result will be a ma- status and profits of the banks,
jor upheaval in the financial-ser- who like to think of themselves
as the local leviathans, will be
vices sector in Israel.
This can also be seen as an at- severely dented.
It's been a long time coming,
tempt by the Recanati family,
former controlling shareholders but now that genuine competi-
of Israel Discount Bank and still, tion is at hand in the various
through the IDB holding com- branches of the financial-ser-
panies it owns, the dominant vices sector, it's all the more wel-
shareholders in DIC, to return come. ❑
to the Israeli banking sector (c) Jerusalem Post 1997
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