An Interview with Avner Ziv, Chief Information Officer & Head of Technology Division, Bank of Israel
"Our commercial & cultural connections to the western world are very strong, and the Internet medium can help us provide technology & financial services globally, while overcoming the geographic barriers that come from our location in the Middle East..."
FST Media: What are your business and digital priorities for the next 6 months?
Ziv: The Bank of Israel was part of a comprehensive reform in the retail banking system over the last year, together with the Ministry of Finance and the Knesset (Israel’s parliament), which entailed a very challenging legislation campaign, with growing voices calling for major reforms in the financial & banking sector.
As with every central bank around the globe, one of the main missions of the Bank of Israel is to maintain financial stability, and we have done so successfully over the last decade, including during the global financial crisis, when not even one financial institution needed to be rescued by the authorities. In the current reform, the Bank has put an emphasis on the need to balance between the call for modernization and increased competition, with the potential risks that these reforms entail.
Another issue the bank had to consider during the past year, was whether the its traditional roles should be expanded or not, in the face of a major leap in business models, technology transitions & information sharing processes.
In the state of Israel, with a relatively small market & centralized financial sector, we found that sometimes the central's bank involvement is needed to push forward processes that otherwise wouldn't happen.
FST Media: How is the Bank of Israel responding to the challenges of digital disruption?
Ziv: There is no doubt that technology is going to play a transformative role and change the face of the banking industry over the next decade. In this changing environment I believe that central banks should facilitate these changes and make sure that they happen in a way that doesn’t put financial stability at risk.
We have recently formed a new Financial Market Infrastructures Division within the I.T. Department, and we are running a new mega-project to establish a Central Credit Registry and an array of credit bureaus that will establish standard credit scoring information for borrowers in Israel. We believe this infrastructure will be an important enabler for new financial services in the Israeli credit market, and also will provide for better financial stability due to more reliable risk assessment, as well as more comprehensive credit market data available for analysis at the Bank of Israel.
FST Media: What role does innovation play in the banking sphere?
Ziv: I think innovation will play a major role in the banking sphere. We see all kinds of players in that area: those who take innovation as a major growth engine for the coming years and have dedicated significant resources to it, and those that stick to the more traditional business models. Personally I believe that "the train has already left the station", and those who will fail to adapt will stay behind.
FST Media: What role can banks play in helping drive Israel’s competitiveness in finance innovation?
Ziv: I think that the cyber & Internet era present a real opportunity for Israel to use its resources to become a significant global player in financial services.
Israel is blessed with highly qualified technology professionals, combined with a very healthy drive for innovation.
Our commercial & cultural connections to the western world are very strong, and the Internet medium can help us provide technology & financial services globally, while overcoming the geographic barriers that come from our location in the Middle East. All of this applies to Israel in general, and to the Israeli banks in particular.
FST Media: What are the key challenges banks will face during 2017?
Ziv: I think that banks will face a big challenge in determining the best path for them in the digital age. I think banks will have to "Fintechticise" themselves as part of their regular business conduct. They should make sure that the technologies they adapt will contribute to their streamlined business models, and that this efficiency will be rolled over to the clients in lower prices and higher quality of services. Secondly, the banks will have to make sure they are ready to defend their business in the cyber frontier.
FST Media: What are the main Cybersecurity risks in the banking industry at the moment?
Ziv: The sad truth is that there is no bulletproof solution today for the risk of a targeted cyberattack. Organizations must use a multi-layer approach in defending themselves. I think one of the most disturbing issues is "knowing the unknown". Most of the organizations have a real problem in knowing their assets and vulnerabilities, and the attacker needs only one poorly managed machine to get in.
Israel is a pioneer in the cybersecurity field, and the Bank of Israel was one of the first central banks to form a cybersecurity regulation unit in the Banking Supervision Division.
FST Media: What technology or innovation is proving to be the biggest game changer for the banking industry?
Ziv: It's very hard to say because there are quite a few of these, but I think that all kinds of financial services that will be delivered as an Internet service (SAAS) have the potential of changing the game. I believe that next generation of traditional banks will not necessarily be "full service" digital banks, but maybe different specialized financial services delivered over the Internet. Also blockchain and the likes have the potential of becoming a real paradigm changer in the very basic parameters of finance.
FST Media: What is the next big thing for The Bank of Israel as far as technology is concerned, and how will you measure its success?
Ziv: The Bank of Israel will guide the commercial banks in their voyage to "Open banking API". We will also consider other market infrastructures that can facilitate growth and healthy competitiveness. We're currently looking at faster payment infrastructures, for instance.
FST Media: What is the best career advice you can give?
Ziv: Be diverse. The technological world is going to convergence, I believe that the market will need more people that can understand the "big picture" and know something about a few things.