CONSUMERS OF GOODS and services pay transaction fees for almost everything. Using an ATM (automated tellering machines) not of their bank branch; sending money to others (whether through ATM or digital banking); paying bills and ordering goods online (using GCash or Pay Maya), and sending money to another person — all these have transaction fees tucked in.
In all these, banks and digital banks reap the benefits — not even doing anything, unlike the bygone years of physical branch banking.
Whether such fees are ethical and moral is not the question, the point remains consumers or users of such technological advancements are being made to pay so high a price for such services.
ONE-TIME SUBSCRIPTION FEE
It’s a good thing, and kudos to Bangko Sentral Governor Eli Remolona, for even considering replacing transactions fees with one-time subscription fees, with the former being slapped on us per transaction which further reduces our hard-earned income only for banks to get very rich.
Remolona broached the idea of adopting a subscription fee model in a speech before the Rotary Club in Makati recently.
He said BSP’s goal is to boost financial inclusion. “A subscription fee … can help maximize these externalities.”
Remolona defined externalities as: “If you look at the payment system, every time you add one more participant, that’s a cost. It’s a small cost, but that extra participant adds value to the whole system. You have a bigger network of participants. That’s what we call a network externality.”
BSP earlier said it wants to remove transaction fees for person-to-person electronic fund transfers and payments to small businesses. “Since 2023, it has been encouraging banks to formalize the removal of these fees to help boost digital payments,” Remolona said noting a certain pushback from banks. Well, of course, they would lose millions on these.
A shift toward subscriptions would reduce reliance on transaction fees and provide a more stable pricing structure for both consumers and merchants, he added.
P2P E-FUND TRANSFER
The BSP has also been pushing for the removal of transaction fees on person-to-person (P2P) electronic fund transfers and payments to small businesses to encourage wider adoption of digital payments. Now that online transactions are being taxed heavily, why add more burden to the merchants?
Remolona noted that for transactions between individuals, BSP is considering zero transaction fees up to a certain threshold, which have yet to be decided through consultations.
While transaction fees have been a common model in digital payments, Remolona stressed that focusing solely on these fees is not the optimal approach. “It’s not about the fees per transaction. I think that’s the wrong model.”
The BSP is currently in discussions with key digital payment providers, including GCash and Maya, to explore the feasibility of a subscription-based payment system. Remolona said that the central bank would work with industry stakeholders to develop an effective solution.
THE RIGHT DIRECTION
BSP data showed the value of transactions done through automated clearing houses InstaPay and PESONet jumped by 35.2 percent to P15.62 trillion as of end-November from a year ago.
Digital payments made up 52.8 percent of the volume of retail transactions in 2023, higher than the 42.1 percent share in 2022.
The central bank wants online payments to make up 60-70 percent of the country’s total retail transaction volume by 2028, in line with the Philippine Development Plan, Business Mirror said.
Like I said this is the right direction, BSP.