Philippine banks and electronic payment services ( EPS ) have started to lower or outright remove digital fund transfer fees via InstaPay and PESONet, in response to a central bank directive. 

InstaPay is a real-time low-value electronic fund transfer ( EFT ) credit push payment scheme for transactions amounting up to 50,000 pesos ( US$811 ), while PESONet, or Philippine EFT System and Operations Network, is the Philippines’ first automatic clearing house under the National Retail Payment System. 

While InstaPay allows for near-instantaneous crediting of transfers, PESONet is a batch electronic fund transfer ( EFT ) credit payment scheme. Customers can send larger amounts via PESONet, but such fund transfers are typically processed in bulk and cleared at batch intervals, and payees receive funds after several hours or days, depending on when the transfers were initiated. Typically, banks charge a fee, between eight to 75 pesos, if a customer wishes to transfer outside their bank network.

However, earlier in June, the Bangko Sentral ng Pilipinas issued BSP Circular No. 1238, which directs banks and other BSP-supervised financial institutions such as e-wallets to ensure that fees for peer-to-peer digital fund transfers for both “on-us” ( within the same bank network ) and “off-us” ( from one bank to a different institution ) transactions are based on a “reasonable and fair market-based pricing mechanism”, and should only reflect the actual cost banks pay to clearing systems to move the funds. The circular gave banks and other BSP-regulated financial institutions until July 4 to comply.

BPI first to comply

The Bank of the Philippine Islands ( BPI ) was the first to comply with the directive, permanently dropping all transfer fees for Instapay and PESONet beginning July 1. 

BPI president and chief executive officer Jose Teodoro “TG” Limcaoco explains that the decision to permanently remove the only difference between intrabank and interbank is because the material difference between the two amounts to only 1.50 pesos, which is the switch fee for InstaPay transactions.

“We think if banks are willing to offer on-us for free, why wouldn’t you give the 1.50 pesos [off-us] also for free?” he says.

As of July 10, in addition to BPI, Rizal Commercial Banking Corporation ( RCBC ), LandBank, Philippine National Bank ( PNB ), Metrobank, PSBank, Security Bank, BDO and EastWest Bank have also removed transfer fees.

Network externalities

In a statement, the BSP says it welcomes the move of several banks to reduce or waive interbank digital transaction fees, making electronic fund transfers more affordable and accessible for Filipinos.

“The value of payments system rises when more people are able to use it. That’s what’s called network externalities. For this, interoperability is essential, but the entry fee should also be low. If it can be zero, even better,” says BSP governor Eli Remolona, Jr.

The circular supports the central bank’s long-standing objective of promoting affordable, convenient, and inclusive digital payments. The BSP says banks must also be ready to justify their fees with cost analyses if asked.

While penalties and sanctions for non-compliant lenders have yet to be announced, BSP deputy governor Mamerto Tangonan told local reporters this week that non-compliant banks have been invited to explain what steps they have taken to abide by the new regulation. 

“It would not be appropriate to impose penalties at this moment [but] if they remain non-compliant even after these meetings, then we may impose sanctions,” Tangonan says.