Israel's Central Bank Delays Digital Mail Reform After Knesset Pushback

The Bank of Israel has postponed a directive requiring banks to switch customers to digital notifications, agreeing to further review the policy after objections from lawmakers. The decision, announced Friday, November 13, by Supervisor of Banks the Supervisor of Banks, extends the public comment period on the proposed reform to November 30. The directive, initially slated to take effect after public review, will not be implemented until a new discussion in the Knesset's economic committee. This delay is expected to last at least a month, as the committee is likely to be formed only with the next government.

The reform, published for discussion on November 3, would allow banks to automatically switch customers to digital notifications without their explicit request, ceasing the practice of sending duplicate paper mail. Currently, banks can only switch to digital mail upon customer request. The Bank of Israel stated the change would enable faster and more convenient information delivery, noting that 92% of banking operations already occur through direct digital channels.

Following negotiations with Knesset members, the reform was modified. Banks will be prohibited from unilaterally switching customers aged 70 and over to digital notifications. The same restriction applies to customers who have not used the bank's website or app in the past year. Banks must also provide advance warning of the switch and will have to revert customers to paper mail if they show no engagement with digital notifications for a year.

Lawmakers, including Yitzhak Pindrus, Ahmad Tibi, Naama Lazimi, Efrat Rayten, and Yosef Tayeb, had opposed the reform. Lazimi argued that such a significant change should not proceed under a transitional government without proper parliamentary oversight, warning of severe consequences for vulnerable populations. The Supervisor of Banks, however, dismissed these concerns in a letter, calling the arguments "factually incorrect" and likely based on "erroneous and misleading information."

Critics within the financial sector decried the delay as a capitulation to a campaign serving postal companies' business interests. Tomer Rabinovich, founder of the public organization 'Dap Hadash,' argued that the default option should favor the customer, not the bank, and that customer consent should be mandatory for the switch.

The reform impacts all Israeli bank customers receiving mail. Concerns were raised about potential harm to the elderly, new immigrants, and those with low digital literacy, as well as an increased risk of fraud. The postal company controlled by Milgam, which handles mail for banks and credit card companies, could lose business.

The Bank of Israel first proposed moving to digital correspondence four years ago but paused the process in October 2023 due to the events of October 7. In January, the Knesset economic committee discussed a draft and formed a group led by Uri Maklev to study the issue. In May, this group concluded that customers should not be switched to digital mail without explicit consent, and paper mail should remain the default.