In an effort to encourage Israelis away from using cash and towards paying digitally, Israel recently enacted a new regulation limiting the use of cash on August 1st.
Starting in 2019, an Israeli company’s cash transaction limit was 11,000 NIS ($3,200) per client. With this restriction on using cash transactions with clients, Israel continues its fight against it.
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According to a statement by Israel’s Tax Authority, the change aims to combat organized crime, money laundering, and noncompliance with tax laws. The new regulation specifies that it would be unlawful to pay firms more than 6,000 NIS ($1,700) in cash. Payments beyond the limit must be made in alternative ways, including by debit cards or digital payment transfer mechanisms.
The maximum amount of cash that can be traded between private individuals not identified as business owners is 15,000 NIS ($4,360), as per the new rule. In all situations, transactions above these amounts may include a cash payment amounting to up to 10% of the entire transaction value.
The objective is to lessen the flow of currency on the market, said Adv. Tamar Bracha, who oversees the law for Israel’s Tax Authority, in an interview with The Media Line. Criminals often use cash, so limiting its use can make it much more difficult for them to commit crimes.
The Adoption of Digital Payments Services
In particular, since the COVID-19 mobility restrictions and the perception that cash is unhygienic, according to the Global Findex 2021 research, the use of digital payments has risen the greatest.
COVID-19 epidemic slowed down a lot of progress and hampered many other efforts. But, on the other hand, for financial inclusion, this epidemic triggered a significant rise in digital payments amid the worldwide development of formal financial services.
The report claims that the average account ownership rate in developing economies rose from 63% to 71% between 2017 and 2021. An increase of almost 8% has been seen during this period. However, around the world, two-thirds of individuals now send or receive payments digitally.
Moreover, about 40% of persons who made a digital payment from their account have done so for the first time since the start of the epidemic in developing nations, excluding China, where digital payments are common.
As per the report, in emerging economies, the percentage of adults who send or receive digital payments rose from 35% in 2014 to 57% in 2021. Moreover, additional financial services, such as storing, saving, and taking loans, are also facilitated by receiving digital payments, such as salary payments, government transfers, or domestic remittances.
Featured image from Flickr, chart from Tradingview.com