The Israeli population is aging, as in other Western countries, and as a result, bank profits are rising. As the people get older and the life expectancy increases, their ability to deal with the financial banks is decreasing.
In 2021, there were 1.163 million elderly people in Israel, which already constituted 12.3% of the total population. Until a few years ago, they made up about 10.3%, and with the establishment of the state, the elderly made up only 4%. In 2035, the proportion of elderly people in Israel from the total population will reach 14%, according to the calculations of the Central Bureau of Statistics.
The proportion of elderly people in Israel (according to the international definition “elderly” is someone over 65 years old) is similar to that in China, but lower than that in the USA – 16.9%, in France – 20.5%, in Germany – 22.9% and of course in Japan with the world record – 28.5%. The elderly among all women in Israel is 14%, and the percentage of elderly men among all men in Israel is 11%.
The percentage of old women among the total elderly population in Israel is 55%. Over the age of 75, the time when they need more help to manage their lives and the household, the share of women among all the elderly already rises to 58%. Over the age of 85, the share of women among all the elderly climbs to 62%, according to data from the Central Bureau of Statistics.
Analogs in a digital world
As people get older, their cognitive ability declines, and correspondingly, their ability to deal with the sophisticated banks also decreases. The elderly lose rights and simple financial opportunities that could improve their standard of living and make them need less favors from people or the government. The trap for the elderly, sometimes also for the younger population over the age of 65, stems from a brutal scissor movement.
The first blade of the scissors is manifested in the fact that life has become digital and online at a tremendous speed within a few years. This includes rapid changes sometimes every few months where everything is done digitally with associated passwords. The activity in the bank accounts and public assets in the banking system, the execution of operations, the transfer of funds, changing the structure of the securities portfolio and the search for alternatives – the majority is done by the customer and not by the bank clerks who have become a rare commodity. Most old people lack digital literacy, naturally.
They did not learn the digitization and the accompanying it, nor were they sufficiently exposed to it during their economic activity. Besides that, according to the Central Bureau of Statistics, two-thirds of the elderly were born abroad, which means that their ability to access the digital Israeli existence is even lower. They simply have low and insufficient digital literacy compared to young Israelis born abroad.
The second blade of the scissors that cut into their financial flesh is the continued reduction of the number of branches, clerks, hours of operation and services for the general public, and especially for the weak who cannot deal with the complicated world of operations on the computer, internet or mobile phone. Although the Bank of Israel demands to make sure that the services will not be affected due to the closing of dozens of bank branches, and also to pay attention mainly to the elderly and the weak, but in practice hundreds of thousands of Israelis are excluded from its banking system.
In an article I published here at the beginning of September this year, I came out against the Bank of Israel, which does not impose on the banks a dynamic system for comparing the credit interest rates, the right interest that the banks in Israel offer to their customers. I proposed that each bank would be required to publish publicly and in a given system the interest rate it grants to the public’s deposits. I detailed how it is possible to act to make it easier for the public to make interbank comparisons and maximize the interest and income on their savings.
To the credit of the Bank of Israel, and especially the supervisor of banks, it can be said that it took into account the extensive claims made in the article in the column published here. Mead told the banks already on September 7 that he would require the banking system to publish the right interest rates actually paid by each of the banking corporations. This week the supervisor has already published a comparison table, as I requested, by hour on a monthly basis, so that the public’s eyes can see what he can get during a period of interest that exceeds his deposits. The supervisor of banks Yair Avidan believes that his activities will strengthen the customers and help them make informed decisions in a simple, accessible and convenient way.
What do we get?
I have been following the Bank of Israel for decades. Such rapid changes have never been made by the Bank of Israel, whose highly paid officials are firmly stuck in the ivory tower, and whose attention to the poor and the common people has never been serious until the recent action of the supervisor of banks Avidan. You can go to the Bank of Israel website today and see the difference in interest rates on deposits. Up to three months, the Bank of Jerusalem leads with an interest rate of 1.36%, and the understatement is Bank Masad from the International Group, a bank mainly for the public of female teachers, with an interest rate of 0.35% – perhaps he assumes that the female teachers do not understand interest rates. For a period of three months to a year, Mercantile Bank leads with 2.31%, and the underdog is Mizrahi-Tefahot Bank with a low interest rate of only 0.87% – perhaps in the surplus it has left compared to the other banks, it finances advertisements that are a song of praise for its human capital.
From one to two years Bank Mizrahi-Tefahot moves to the first place with an interest rate of 2.81%, and the lowest is Discount Bank with an extremely low interest rate of 0.34%. From two to five years, the maximum at Mizrahi-Tefahot Bank is 2.44%, and the minimum interest rate is Discount Bank with only 0.65% (close to the time of writing this column, digital bank One Zero also published its interest rates, which exceed all of its competitors).
The interest rate became even more critical this week, after the Bank of Israel raised the annual interest rate by another 75 basis points to 2.75%, and it predicts that the interest rate will reach 3.5% in a year. In my estimation, the interest rate will be even higher than that. What is clear is that the urgency of the public to carry out pricing, “shopping” in the vernacular, between the banks regarding the interest rate it can receive – has increased, and it is a lot of money for the coming year. Perhaps this is an amount that will allow you, the readers, and the rest of us to finance a trip abroad (after shopping among the airlines regarding the cost of the next trip abroad, of course). In the coming year, inflation will decrease compared to the levels it reached last year, while interest rates will continue to rise. This means that after a long period of time the public will receive a real interest rate maybe in a year, not immediately. “Real” is an interest rate higher than the inflation rate that will prevail in a year.
According to an inspection by the CBS according to international standards, there has been an increase among the elderly in recent years in access to a computer, but the relative part that has paid off is still lower than the population under the age of 65. In a survey regarding the indicators for optimal aging by the CBS for 2020, it was found that there was an increase in the use of the Internet mainly due to the mobile phone. Note, for example, that the proportion of men using online government services was twice that of women, which means that as women age, they suffer more from digital literacy difficulties, and one can assume that also in accessing banking services.
The Jews use the Internet for online government services four times more than the Arabs – another weak population that will be trampled under the wheels of rising interest rates and inflation tailing the public’s purchasing power. But let’s go back to women: the number of years old women live with disabilities is greater than among men – 11.5 years compared to 7.7 years. For this reason, the delivery of digital literacy courses by the government – yes, the government – is extremely essential, so that they can enjoy the best life in their last years, bringing a good return on their money. The employment rate among men aged 65 and over stands at 21% – twice the employment rate of old women, and the gap has been maintained over the years.
Information is worth money
Among all those aged 65 and over, the use of the Internet increased from 32% in 2015 to 67% in 2020. It is to be hoped that the use of the Internet will improve the condition of old women and the old men to also receive a return for their money in foreign currency placed in the banking system – an issue that the supervisor of banks did not allow On him, for now, the mind. At the end of June, the public holds foreign currency deposits amounting to approximately NIS 373 billion, which include approximately NIS 6 billion in foreign currency in compensation deposits from Germany. Until a few months ago the interest rates on the foreign currency were zero, in fact the interest rate on the euro was negative and the interest rate on dollar deposits was almost zero. But today, after the massive interest rate hikes in the US to about 3.05%, you can get excellent interest on a dollar deposit.
Tens of thousands of Israelis, mostly old women and men, must not have heard that it is now possible to get a handsome interest on these deposits. Even assuming that holders of foreign currency in deposits will receive 3% per year, it is possible to receive even higher interest on large amounts, that is, interest for the public from foreign currency deposits in the amount of NIS 11.2 billion per year. Just to give you an idea, a US government bond, the safest asset in the world, yields for three months an annual return of about 3.3%, and for six months, a year and two years an annual return of about 4%.
Naturally, there are daily changes in returns that should be a reference point for you. Have your bankers offered such alternatives for investing in foreign currency in the dollars you hold in your accounts? My feeling is that the bankers have become silent fish who are not interested in their customers, and certainly not in the old customers. The Supervisor of Banks Yair Avidan should embark on a new path of due diligence for bank customers, this time in the field of foreign currency. True, the war against the banks is complete and Sisyphean, but there is no choice. The State Comptroller Mattaniho Engelman should immediately examine the issue of the public’s right to know about the possibilities for savings and interest in the Israeli banking system.
The banks’ profitability is important, their efficiency is necessary and their existential stability – should it be on the backs of the weak who will now weaken even more, because price stability has been damaged and interest rates are soaring? Perhaps the banks can think of other ways to stabilize the system: freeze the wages of their employees who are no longer dealing with “annoying” customers, but with friendly computers and software, reduce bonuses, reduce training days for employees, reduce dividends for shareholders and perhaps also look at the backyard of Israel and ask for forgiveness for the New Year’s Eve?