The country’s biggest banks are closely collaborating with the Bangko Sentral ng Pilipinas (BSP) to find workable ways to manage losses if they do decide to implement an indefinite waiver of fees for online transactions worth P1,000 and below.

BSP Deputy Governor Mamerto E. Tangonan said that for the past year, there are more discussions than before on how banks can recoup losses for maintaining free-of-charge service for small value transactions online.

“We’re still working on it. There’s still some concerns but we’re working on overcoming those concerns,” he said. These concerns involve losses that banks will have to recover and appropriate incentives to make it palatable for both banks and non-banks.

“There are costs to the delivery of service. (For banks) to operate it for free you have to recover it somewhere else. We’re discussing how that should work,” said Tangonan in a mixture of English and Filipino.

For the big banks or the universal and commercial banks, they have been offering free-of-charge transfer service for P1,000 and below but these are on limited time only, subject for renewal depending on the banks.

Big banks’ worry

There are two large banks that dominate InstaPay transfers and these are Union Bank of the Philippines (UnionBank) and BDO Unibank Inc. of the SM Group. InstaPay is a real-time, low-value digital payments facility that substitutes for cash transactions.

BDO president and CEO Nestor Tan said they need to review proposals from the BSP carefully. 

With regards to BSP preferring a more permanent waiver of fees for online transactions of P1,000 and below, he said, “I haven’t heard about it and I will have to assess that.”

On the other hand, UnionBank president and CEO Edwin R. Bautista said the Aboitiz-led bank could consider an indefinite waiver of fees for small value transactions online but it will depend on the results of the ongoing talks with the BSP and the payments industry.

“Right now, we’re waiting for any other developments but it’s possible,” said Bautista.

He said that while most of the nine million InstaPay transactions that UnionBank handles on a monthly basis are done by digital-based clients, some of their branch clients also transact online. It will be alright, he said, if they will all transact purely digitally because the cost to the bank is manageable.

“I think ang magkaka problema dyan, some of the banks where the customers are half digital, half branch base. Kasi kumakain ng resources sa bangko yan. Ma offset mo lang yun sa mga fees (The problem is if customers transact half digital, half branch-base, because that will affect our resources and we can only offset it by charging fees),” said Bautista.

He also said that if they cannot find a solution on how to recover losses, then “there’s also no incentive for the banks (to do that).”

However, Bautista said that UnionBank will study how it can be done, because they want to nurture the young, and up-and-coming entrepreneurs that make up some of the micro, small and medium enterprises (MSMEs). “It’s an investment for the future … the MSMEs eventually become successful and grow bigger,” he said in a mixture of English and Filipino.

Incentives, rather than zero rates

The Ty Family-owned Metropolitan Bank and Trust Co. (Metrobank) is one of the first big banks to adopt zero rates for P1,000 and below online transfers, but making it permanent is not something the bank has thought of yet.

“We’re trying it out since last year and we extended it. So, let’s see,” said Metrobank president and CEO Fabian S. Dee.

He said waiving fees even for a short period incur losses. “It’s part of the whole equation. We’ll see how it goes,” he added.

When asked if there was an increase in customer usage of online fund transfers with the zero rates, Dee said there was “a little (but) not so much because these are existing customers who regularly do transactions … it’s more of a token of appreciation.”

The Yuchengco’s Rizal Commercial Banking Corp. (RCBC) is aware of what the BSP wants, but they have been studying online transactions for a while and will come up with their own solutions and proposals.

RCBC president and CEO Eugene S. Acevedo said he’s not sure if zero rate online transfers do motivate people to use it more.

“We’re experimenting with it but we’re looking for other ways to see how else can we increase the usage. The question is usage and we’re assuming that by making it free, it will increase the usage. That’s the assumption,” he said.

Acevedo said there are other ways to increase the use of online transactions via InstaPay or PESONet. One example is incentivizing users such as bundling it with other banking products.

“In banking, we know it’s not always just price,” he said.

One other way RCBC is exploring is tying it with its revenue model, and part of a bigger ecosystem.

“A customer is not just somebody who does payments. A customer does other things. We have to think of the customer as part of an ecosystem,” said Acevedo.

In January, BSP Governor Eli M. Remolona Jr. said they are encouraging banks and non-banks such as Maya and GCash to implement a permanent zero rate for small value transactions of P1,000 and below.

For now, he observed that banks and non-banks are hedging, and only issuing time-bound waiver of online transfer fees for small value transactions.

Free small-value online transactions will help the central bank achieve its goal of shifting about half or 50 percent of all payment transactions into e-payments.

“We want it more permanent and more systematic … the intention is to make it indefinite,” said Remolona last Jan. 22.

In December 2023, the BSP announced that it will continue to impose a cap on interbank money transfer fees by InstaPay and PESONet and bans an increase in fees until such time when all banks and non-banks implement zero rates on small e-payment transactions.

The BSP first imposed a moratorium on the automated clearing houses’ fees on Dec. 28, 2021, and ordered all BSP supervised financial institutions with InstaPay and PESONet to not increase their current fund transfer fees until 40 percent of all retail payments have migrated into digital or e-payments.

As of end-December 2022, 42.1 percent of all payment transactions have shifted to digital form.

The BSP said that subject to a review, the moratorium on InstaPay and PESONet fees will only be lifted “when zero fees for small e-payment transactions have been implemented by the payments industry.”

By the end of last year, the combined value of both PESONet and InstaPay transactions reached P12.86 trillion, up 29.3 percent from P9.94 trillion in 2022. Volume-wise, transactions increased by 46.7 percent to 929.64 million from 633.47 million in the previous year.