Financial Cards and Payments in Israel

COVID-19 impact on consumer payments

The COVID-19 pandemic had a major impact on Israel’s financial cards and payments industry during 2020. While the overall effects of the economic uncertainty that emerged quickly during the early stages of the pandemic situation and the adverse economic situation that have developed over the course of the year have been generally negative in terms of suppressing consumer demand and substantially reducing spending, some interesting trends have emerged from the situation that have mitigated the negative impacts of the pandemic.

COVID-19 country impact

Israel’s first case of the COVID-19 virus was confirmed on 21 February, when a female citizen tested positive after returning from quarantine on the Diamond Princess cruise ship, berthed in Japan. This led to a 14-day home isolation being imposed anyone who had visited South Korea or Japan and a ban was placed on non-residents and non-citizens who were in South Korea during the 14 immediately preceding their arrival in Israel.

The Israeli economy struggles under the pressure of COVID-19

The COVID-19 pandemic resulted in Israel’s economy sliding into recession over the course of 2020. This was accompanied by a substantial decline in consumer confidence as the employment rate rose dramatically from 3% to 25%, while many people were temporarily laid off and/or required to go part-time.

Debit cards emerges strongly during 2020 as consumers shy away from card lending

One very interesting feature of Israel’s financial cards and payments industry is that debit cards is a far smaller category than either charge cards or credit cards. Indeed, charge cards rivals credit cards for leading position in terms of cards in circulation, with debit cards very far behind either of these categories.

Launch of Combo Card blurs the lines between debit cards and charge cards

During 2020, a new payment card was launched in Israel with the potential to revolutionise the way in which Israeli consumers manage their money. The Combo Card is essentially a hybrid financial card which offers the cardholder the option to choose whether they would like the transaction to be completed via an instant direct debit from their current account, or whether they want the transaction to be paid for from their charge card account.

What next for consumer payments?

Although it scarcely needs to be stated that the performance of Israel’s financial cards and payments industry will depend largely on the pace of the recovery of Israel’s economy from the negative impact of the COVID-19 situation, the reality is that the country’s economy has proven fragile under the pressures created by the COVID-19 pandemic and the official response to it. Nevertheless, once the threat of widespread contagion has passed, whether due to effective management of the spread of the COVID-19 virus or via widespread vaccination among the country’s population, the situation can be expected to improve immediately and robustly.

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