Payment Rail Systems
Karthikeyan Sundaram
Karthikeyan Sundaram
June 4, 2024

ZAHAV and MASAV Faster Payments: A Comprehensive Guide

In this article, we provide a comprehensive guide to ZAHAV and MASAV, Israel's advanced faster payment systems. We'll discuss their features, benefits, and how they facilitate rapid, secure financial transactions. Learn how these systems enhance payment efficiency and security in Israel's financial landscape.
ZAHAV and MASAV Faster Payments: A Comprehensive Guide

ZAHAV System: Real-Time Gross Settlement in Israel

The ZAHAV system (an acronym for Real-Time Credits and Transfers in Hebrew) was launched in Israel at the end of July 2007. It is a Real Time Gross Settlement (RTGS) system, similar to those operating in many other developed and emerging markets. ZAHAV is designed to provide advanced, real-time, final, efficient, and reliable settlement of shekel payments within Israel. This system operates alongside the regular settlement methods where transactions are not final throughout the business day. In contrast, payment instructions in the ZAHAV system are executed immediately and become final upon execution, ensuring rapid and secure payment settlements.

One of the primary advantages of the ZAHAV system is its immediacy. Payments conducted through ZAHAV are completed instantly, allowing the recipient to use the funds within minutes of the transaction. This immediate access to funds enhances the liquidity and financial efficiency for businesses and individuals alike. Another significant advantage is the finality of payments. Once a transaction is executed in the ZAHAV system, it is irrevocable and cannot be canceled, providing certainty and reducing counterparty risk.

Operating Hours and Security

The ZAHAV system operates continuously during the banking business day. On weekdays, it functions from 07:45 to 18:30, and on Fridays and holiday eves, from 07:45 to 14:00. Security is a top priority for the ZAHAV system. It incorporates advanced components and interfaces with commercial banks and TASE clearinghouses via the SWIFT system, an international standard for secure fund transfers. The system uses the International Bank Account Number (IBAN) to identify bank accounts, ensuring that payments are sent directly to the beneficiary's account without human intervention, thereby reducing errors and enhancing security.

Operational Details

Settlement in the ZAHAV system occurs throughout the working day in real-time. Each payment instruction is settled individually without offsetting the sender bank's debit and credit movements. This real-time processing ensures that payments are executed promptly and efficiently. While ZAHAV is primarily intended for large and urgent payments, there is no minimum amount requirement for transactions, allowing payments of any size to be processed through the system.

Despite its advantages, the ZAHAV system is mainly used for large and urgent payments due to the associated costs. For lower value payments, other methods such as the Paper-Based Clearing House and Masav are still prevalent, offering a more cost-effective solution for less urgent transactions.

MASAV Fast Payments Service in Israel

The MASAV Fast Payments Service, operated by the Banking Settlement Center (MASAV) in Israel, provides a platform for immediate credit transfers. This system allows participants and organizations to send credit instructions that are executed in real-time, ensuring that the funds are available to the recipient almost instantly. Typically, the beneficiary receives the credit in their account within 5 to 7 seconds of the payment instruction being issued, making it one of the fastest payment methods available in Israel.

Manner of Activity

The MASAV Fast Payments Service ensures the immediate transfer of payment instructions to participants, enabling them to update their customers' payment accounts promptly. This real-time processing allows for immediate and final crediting of funds, similar to the immediacy of cash transactions. The system operates in conjunction with the ZAHAV Credits, Debits, and Transfers System, ensuring a seamless reconciliation process.

The primary function of the MASAV Fast Payments Service is to facilitate immediate and final money transfers between payment accounts of system participants. The term "final" means that once the transaction is completed, the funds are irrevocably available to the beneficiary for immediate use. This provides a high level of certainty and security for both the payer and the payee.

Fast payments via MASAV are mainly used for immediate money transfers between individuals. However, the service is being expanded to include payments at merchants and receipts from the government. Additionally, a solution for sending R2P (Request to Pay) by beneficiaries to collect fast payments from customers is in development. This expansion will further enhance the usability and reach of the MASAV Fast Payments Service.

Participants in the MASAV system include payment account managers who oversee the immediate and final credit of funds to the beneficiary's account. This real-time activity ensures that recipients can use the funds as soon as the transaction is completed, providing unparalleled convenience and efficiency.

Here is a quick comparison of different payment systems in Israel:

The ZAHAV and MASAV systems enhance the efficiency and security of financial transactions in Israel.