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Cash Limitations and Deterioration of Banking Service in Israel

Categories : Cash connects people, Cash is the first step of financial inclusion
October 25, 2017
Tags : Cash, Cash circulation policies, Cash restrictions, Commercial bank, Israel, poverty, Social Inclusion
Former Director of the Currency Department of the Bank of Israel, Mordechai Fein, analyses the growing debate in Israel about cash restrictions and the growing controversy linked to the closure of commercial banks.

After writing about the bill to limit the use of cash in Israel and Israelis’ preference for cash, former Director of the Currency Department of the Bank of Israel, Mordechai Fein, now dives into the growing controversy about commercial bank closures in Israel and the consequences for low-income communities and the elderly.

Mordechai summarises and analyses four major articles that have appeared in Israeli media and reminds the reader that any shift in the payments or banking landscapes must be properly and thoroughly accompanied by the government while keeping in mind citizen’s needs, rich and poor, young and old.

Indeed, despite the Ministry of Finance’s recent ultimatum requiring the Legislation and Law Committee of the Knesset, led by Mr. Nissan Slomiansky, to approve the bill on limiting the use of cash in Israel (on hold since 2015), Mr. Slomiansky has made it clear that he will not put it on the Committee’s agenda until the government can prove that alternatives to cash are up and running.

There have been several articles in Israeli media about cash limitations and the deterioration of banking services in recent months. More recently, one was written by a senior economic journalist who criticizes the meaningful delay of applying limitations on the use of cash and the existence of only large denominations at ATMs. Two other articles criticise the banking system and the Supervisor of Banks, who are systematically allowing the commercial bank services to deteriorate, particularly in low-income neighbourhoods.

When the first steps were taken to start limiting the use of cash, people around the world showed no signs of objection to this trend, whether it derived from a fear to be regarded as a tax evader; or from the inability to evaluate the damage it might cause; or from a lack of ability to influence; or just from indifference. However, as time goes on, the Israeli public is starting to feel the impact of these measures as it becomes increasingly difficult to withdraw or even to locate one’s money: a matter which is far from trivial.

We are starting to notice a shift in people’s attitudes and an appearance of wave of protests. This disapproval is manifesting itself through a wave of articles in the media published within twelve days in three different newspapers by two distinguished authors, and one research institution of the largest municipality in Israel. These articles well describe how the banking system service is deteriorating, especially when linked to cash and to senior citizens. While the first two articles describe the impact on low-income households in general, the third article goes more in depth and shows how banking services starkly very between low-income areas within the same city, relative to wealthy areas. It is very clear that bank customers face severe difficulties in getting access to proper services at bank branches in general and withdrawing their own cash from their bank accounts in particular.

During the last few weeks, we are also witnessing a comprehensive coverage of the topic on two of the most popular TV channels – at prime time – presenting the helplessness of the elderly and the non-technology savvy that have major difficulties in managing their business through digital banking. The central issue put forth in these stories is that low-income areas are being supported by neither the banks themselves nor the authorities.


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