THE Bangko Sentral ng Pilipinas (BSP) disclosed on Monday that the Bankers Association of the Philippines (BAP) was receptive to bringing down transaction costs in lieu of lowering the reserve requirement ratio (RRR).
On the sidelines of a forum hosted by the Philippine Chamber of Commerce and Industry (PCCI) on Monday, BSP Governor Felipe M. Medalla said they will be working with the BAP to make transactions free of cost for small amounts.
Medalla said paying P5 to P10 per transaction or as much as P15 to P20 per transaction is significant, especially relative to small transactions of around P200 to P500. The BSP is hoping that bringing down the RRR would encourage banks to waive the fees for these amounts.
“A recent example of this stronger guidance was provided in last week’s bankers’ night when we said we will reduce the RRR. We hope in return, the banks will waive all fees for small transactions when people make bank to bank payments,” Medalla said in his speech on Monday.
“We’re literally bribing the banks to subsidize the small transactions. And from what I hear, the Bankers Association, they are receptive to this and I look forward to more and more digital payments especially by the poor using their accounts, which have grown significantly because of InstaPay and so on,” he added.
Medalla said the cut in the RRR could be to work toward bringing it down to 10 percent which is the target, or even down to single-digit rates. However, this cut may not be done in just one reduction.
He said the reduction may be done in several cuts and will be subject to the slowdown in the inflation rate. The cuts may only happen if the inflation rate is “clearly moving toward the targets” to avoid confusing the market.
The BSP is still tightening monetary policy and is one of the central banks that posted the highest rate increases. To date, the Monetary Board has raised interest rates by 400 basis points.
“[This] means it will cost us. Because now when we mop up liquidity, we have to pay the policy rate. But we don’t mind the higher costs [if] it means smaller transactions don’t have to be cash. I’m confident that it will happen soon. I’m sure the BAP will work out a proposal that we can all agree on,” Medalla said.
Medalla said the removal of transaction costs will only cover mobile-to-mobile or QR transactions. This is one of the ways by which the BSP aims to attain financial inclusivity.
The BSP Governor earlier said the banking community as well as the government may be able to “find a cost-sharing system” that will exclude small payments from fees.
Medalla said this is worth pursuing, provided that transactions are below a certain number or around three transactions per day.
Efforts to further digitalization, Medalla said, are under way. InstaPay and PESONet are “great successes” and more people are now using QRs to make payments.