MANILA, Philippines – The P10 or P15 transfer fee for transferring money between banks is finally disappearing, but why now?
As of Friday, July 17, at least 14 wholesale and commercial banks had waived InstaPay and PESONet fees for individual customers, according to the Bangko Sentral ng Pilipinas (BSP). The list includes major players: BDO, BPI, Metrobank, UnionBank, Landbank, PNB, Security Bank, RCBC, China Bank, and EastWest.
The wave of zero fees followed BSP Circular No. 1238, which changed how financial institutions can charge for transfers from one person to another. Basically, if sending money to another account within the same bank is free, then sending to a different bank should only show an additional switching cost. For InstaPay transfers, the switching cost is around P1.50.
Since many banks already make transfers within their systems free, the old P10 to P25 fee became difficult to justify. Banks could theoretically start charging for one bank transfer. Many instead decided that collecting such a small bank fee was not worth upsetting customers.
Why now?
The BSP is concerned that the Philippines’ rapid shift towards digital payments may lose momentum.
Digital payments accounted for 57.4% of monthly retail transactions by volume in 2024, up from 52.8 percent in 2023. That was still an improvement, but the increase slowed to 4.6 percent — less than the double-digit 10.7-point jump recorded a year earlier.
This rate of digitalization is not fast enough if the government wants to achieve its goal of making digital payments 60 to 70 percent of retail payments by 2028.
BSP Deputy Governor Mamerto Tangonan said high fees have been listed among the main reasons why some Filipinos do not use digital payments, along with unreliable internet.
“That’s why this calls for immediate action. For the first time, we only had one digit,” Tangonan told reporters on Monday, July 20. “If we don’t do anything, don’t expect different results. That’s why we have to do something. We have to continue. We still have a long way to go (We are still far from the goal).”
It should come as no surprise that some bank executives told him that transactions and customer inflows increased within a week of their fee waiver, though he said it was too early to say whether the increase would last.
And although the BSP only launched this regulation now, the policy was many years in the making. During the crisis, the central bank persuaded institutions to temporarily waive the fees, but the payments later returned. It later made free transfers to small sellers through voluntary arrangements with payment levels of P1,000 and P500.
The compromise created new problems. Policies varied across institutions, confusing customers. People also split large payments into smaller transactions to stay under the threshold, causing transaction counts to rise without a corresponding increase in value. The proposal to offer customers 10 free transactions per week met with industry opposition.
After those attempts failed to transfer the entire market, the BSP moved to a cost-based system now forcing institutions to rethink whether transfers should remain a source of profit.
The end of the transfer fee structure?
Transfer fees do not have to disappear everywhere immediately. Circular no. 1238 doesn’t just mandate every institution to charge zero. But it puts pressure on the long-term revenue model whenever a customer moves money out of a bank or e-wallet.
“Since the transfer started, the previous model has been to pay from transfer fees,” Tangonan said.
“We would like to encourage the sector to rise to that level instead of just making transfers,” the deputy governor added, referring to providing other financial services such as investments, savings products, and loans to the financially disadvantaged.
For Tangonan, financial companies should “reform” by making up for any lost fee income by offering more comprehensive services instead: better savings products, responsible loans, insurance and investments that are accessible to ordinary Filipinos. Referrals can be a key gateway to attracting and retaining customers instead of products to monetize.
Another important aspect is the data generated by the payment. Tangonan said transaction histories can show where money comes from, how much a customer has left, and where it is spent. Banks and their affiliates may use that information to assess creditworthiness or offer more suitable financial products. (READ: (Finterest) How your e-wallet history can help you get a cheap loan)
What? what’s next
BSP still has unfinished business.
Tangonan said most of the top 20 banks and e-wallet providers have complied, but some still have “room for improvement.” The central bank reviews their costs and details.
Among the financial institutions that have not yet fully complied with the circular are GCash and Maya, which have reduced their fees but still charge P10 for InstaPay transfers. BSP is still negotiating with these service providers.
For consumers, Tangonan’s advice is to take advantage of free movement while other fees remain.
“That’s the beauty of money or money being able to move freely on the Internet gives the public a choice,” Tangonan said. “It’s easy now. The deal here is bad, you can transfer it there for free (It’s easy now. If the deal is bad here, then, it’s free to transfer your money there).”
If another institution offers a better deposit rate, loan rate or service, customers can open more digital accounts and transfer their money tax-free. In theory, this forces banks to compete for a customer’s entire financial relationship rather than relying on transfer friction to keep money in its place.
Tangonan also stressed that they must also build the other half of the market, which is the merchant market where customers can use digital. The second less visible part of Circular No. 1238 makes it easier for low-risk businesses to fly in, including informal businesses that may lack income tax returns or full business permits.
A lower fee could bring millions of users willing to pay digitally. But as a neighborhood barber, market seller, or sari-sari the store cannot accept payment, BSP argued that cash will still stand. – Rappler.com
