MANILA, Philippines – Banks, e-wallet operators, and other supervised financial institutions have until Saturday, July 4, to comply with the Bangko Sentral ng Pilipinas’ (BSP) new rules meant to bring down digital transfer fees, a high-ranking central bank official said.

BSP Deputy Governor Mamerto Tangonan said banks and other financial institutions covered by Circular No. 1238 are expected to adjust their electronic fund transfer fees once the new regulation takes effect on July 4.

“Tomorrow, the new policy takes effect – Circular 1238. We anticipate, and we expect, the payment service providers to comply,” he said at the sidelines of a BSP book launch on Friday, July 3.

The BSP official said failure to comply could lead to enforcement action, although he described the initial steps as not immediately punitive.

“First, there’s a friendly reminder. And then, there’s another reminder, less friendly,” Tangonan said when asked what enforcement action would mean.

Some financial institutions have already moved to lower or eliminate fees, including Landbank, BPI, and RCBC.

The new rules come after years of consumer complaints over digital transfer fees, which can range from around P10 to P25 and upward, depending on the bank or e-wallet. The BSP had previously imposed a moratorium on fee increases during the pandemic, but has now shifted to a framework that allows fees to move only if institutions can justify them. (READ: Are digital payment fees too high? Even Dutch Queen Máxima seems to think so)

Under Circular No. 1238, BSP-supervised financial institutions must adopt a “reasonable and fair market-based pricing mechanism” for electronic payment transactions.

The rule covers not only traditional banks, but also BSP-supervised payment providers and e-wallet operators such as GCash and Maya.

How will fees go down?

The most important part for consumers is the rule on the difference between same-bank and interbank transfers.

Same-bank transfers are called “on-us” transactions. These happen when both the sender and recipient use accounts in the same institution, such as BPI to BPI, BDO to BDO, or GCash to GCash. Interbank transfers are called “off-us” transactions, where the sender and recipient use accounts held at different institutions.

Many on-us transfers are already free. The BSP’s point is that off-us transfers should not be priced as if they carry an entirely different cost structure.

Tangonan said the main difference between on-us and off-us transfers should be the switch fee, or the cost paid to the network that processes the interbank transaction.

“Bank A to Bank A, free. And then if you want to maintain that free Bank A to Bank A, free, when you do Bank A to Bank B, it should be [just] plus switch,” Tangonan said.

For InstaPay transfers, the switch fee is around P1.50. This means that following the new rules, the difference between on-us and off-us transactions should only be around P1.50.

“So all we say is that whatever you charge, the price of your off-us transaction must be the same as your on-us [or] cannot be more than your on-us price plus the switch fee. That’s all it says,” he added.

Put simply, the BSP does not want one type of transfer subsidizing another.

“That’s what you want to remove,” Tangonan said. “It’s more fair if you don’t make one transaction pay for another. So if you want to charge a fee, you allocate it to all transactions. That’s the essence of the situation.”

Tangonan said the lower-fee push is meant to encourage more Filipinos to use digital payments.

“The outcome there is that more consumers will use digital payments,” Tangonan said. “Because one of the barriers is, they say, high fees. So if you remove that, more customers will use it.”

Higher merchant acceptance

The BSP is also trying to solve the other side of the payments equation: merchant acceptance.

Tangonan said payments are a “two-sided market,” where it is not enough for consumers to have digital wallets or bank accounts if they have few places to use them.

“When you increase the consumer usage, you have to increase the number of merchants where they can use it. Otherwise, all of us have a balance, but there’s no one to pay to,” he said.

To help bring more small businesses into the digital payments system, Circular No. 1238 also eases onboarding requirements for potentially low-risk merchants, such as sari-sari (general merchandise) stores, beauty shops, and bakeries. Tangonan said a national ID or other identity document may be enough for such merchants, instead of heavier documentary requirements like business permits.

“The aim there is more merchants will come on board and you now have more consumers and more merchants, and more merchants will encourage more consumers, more consumers will encourage more merchants, and it becomes a virtuous cycle,” Tangonan said. – Rappler.com