THE Bangko Sentral ng Pilipinas (BSP) and local banks are close to reaching an agreement on bringing down the transaction costs for electronic payments.
The BSP had initially said banks would be amenable to reducing transaction fees in exchange for a cut in the reserve requirement ratio (RRR). (https://businessmirror.com.ph/2023/02/28/bap-open-to-scuttling-costs-for-small-transactions/)
The RRR was cut by 250 basis points last week. The BSP lowered the RRR of universal and commercial banks to 9.5 percent from 12 percent. (https://businessmirror.com.ph/2023/06/09/banks-rrr-slashed-by-250-bps/)
“I think the industry as a whole must agree. But I think we’re almost there. [We are] talking to TG [BPI President and CEO Jose Teodoro K. Limcaoco, who is also the President of the Bankers Association of the Philippines] and the bankers. They themselves are interested in making it work,” BSP Governor Felipe M. Medalla told reporters on Monday on the sidelines of a BPI event.
Medalla said among the key points to agree on involves the question of whether they will allow big companies and unregistered small businesses to avail themselves of the reduction and/or removal of transaction fees.
“Now, the problem is, do you want to extend the same privilege to, say, a large supermarket? Maybe not, right? So they now have to evolve their process,” Medalla said.
“When you say the merchant must be registered as a small merchant [and] be entitled, [the problem is] many of our countrymen don’t like to register. To me, treat every person-to-person transaction as a merchant and let the operators figure out who the real merchant is as the data evolves,” he explained.
Medalla has made it clear that small electronic transactions not exceeding P200 to P500 must not be charged any fees. He stressed that a P10 or P15 fee per transaction may seem small, but when added could be significant, especially to small businesses.
He said bringing down or removing transaction costs augurs well for the BSP’s goals on financial inclusion. Medalla said the increase in digital banking and e-wallets accounted for 80 percent of the growth of bank accounts in the country.
The proliferation of e-wallets and electronic transactions removes limitations posed by one’s physical wallet. This allows Filipinos and even tourists to increase their spending without physical cash.
The increase in the use of these electronic payment methods also allows the transfer of resources, even if there are physical impediments such as the recent lockdowns.
Medalla recounted how he used digital payments to a sari-sari store to help out his children’s former nanny who was in need of funds during the pandemic, but did not have any e-wallet.
“Do not get lost in the large numbers. Somebody did not starve or did not go hungry because there was this way of sending money when all else was not possible during the lockdown. To me, those are the most important things,” Medalla said.
“The important thing is, let’s not be too macro. Let’s consider how these things, at the level of human existence and welfare, are very important,” he said, partly in Filipino.
Earlier, 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 hopes that bringing down the RRR would encourage banks to waive the fees for these amounts.
He 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 thinks 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.
Image credits: Patrick Roque via Wikimedia Commons CC BY-SA 4.0