THE BANGKO SENTRAL ng Pilipinas (BSP) is examining the potential of adopting a “subscription” model for minor electronic fund transfers such as e-wallet payments to substitute transaction fees.
“Due to what we refer to as network externalities, there should be a fixed subscription fee instead of a charge for each transaction,” BSP Governor Eli M. Remolona, Jr. stated during a Rotary Club briefing on Thursday.
“We are still in the process of determining the best way to implement this. We’re in discussions with GCash, we’re in talks with Maya, we’re in conversation with all the stakeholders, and we aim to reach a consensus.”
The central bank previously mentioned its goal to abolish transaction fees for person-to-person electronic fund transfers and payments made to small enterprises.
Since 2023, it has encouraged financial institutions to formalize the elimination of these charges to enhance digital transactions.
“As you are aware, the current scenario exists between an individual and a business. The merchant bears the fees. The individual remains unaware of it, but it becomes part of the amount that the person pays,” Mr. Remolona remarked.
“In interactions among individuals, we are considering the possibility of setting that to zero. No charges applied up to a specific threshold. We have yet to define that threshold.”
Nevertheless, Mr. Remolona acknowledged that there has been some resistance from banks.
“The banks expressed concerns that if this implementation occurs, those exceeding the threshold will simply split their transactions to fit within it. However, there’s a more fundamental concern at play. It’s not merely about transaction fees. I believe that’s an erroneous model.”
In his keynote address, Mr. Remolona indicated that they have been working on identifying the most effective model for digital transactions to enhance financial inclusion.
“If you analyze the payment system, every time you introduce an additional participant, that incurs a cost. While it’s a minimal cost, that extra participant adds value to the entire system. You end up with a larger network of participants. This phenomenon is what we term network externality,” he explained.
“We aim to optimize this by reevaluating the fee structure, decreasing reliance on transaction fees, and increasing dependence on subscriptions, which represent a more fixed expense. We hope this will assist us in maximizing network externalities within the payment system and ultimately lead to increased financial inclusion.”
Recent statistics from the BSP revealed that the value of transactions processed through automated clearing houses InstaPay and PESONet surged by 35.2% to P15.62 trillion as of the end of November compared to the previous year.
Digital transactions constituted 52.8% of the overall volume of retail transactions in 2023, an increase from the 42.1% share recorded in 2022.
The central bank aims for online transactions to represent 60-70% of the country’s total retail transaction volume by 2028, in accordance with the Philippine Development Plan. — Luisa Maria Jacinta C. Jocson