THE BANGKO SENTRAL ng Pilipinas (BSP) is exploring the possibility of implementing a “subscription model” for small electronic fund transfers such as e-wallet payments to replace transaction fees.
“Because of what we call network externalities, there should be a subscription fee, which is fixed instead of a per-transaction fee,” BSP Governor Eli M. Remolona, Jr. said. Thursday during a Rotary Club briefing.
“We are still figuring out how exactly to do that. We talk to GCash, we talk to Maya, we talk to all the participants and we are going to agree on something.”
The central bank previously said it wants to eliminate transaction fees for person-to-person electronic fund transfers and payments to small businesses.
Since 2023, it has been encouraging banks to formalize the abolition of these fees to boost digital payments.
“As you know, the situation now is between an individual and a trader. The merchant pays the costs. The individual doesn’t see it, but it is part of the price the person pays,” Mr Remolona said.
“Between people, between individuals, we are thinking about making it zero. No fees between up to a certain threshold. We have not determined the threshold.”
However, Mr Remolona noted that there has been some resistance from banks.
“The banks complained that if you do that, the guys who are above the threshold just divide their transaction so that they are within the threshold. But there is a more fundamental problem. It is not about the costs per transaction. I think that’s the wrong model.”
In his keynote speech, Mr Remolona said they have been working on studying the best model for digital payments to drive financial inclusion.
“If you look at the payment system, every time you add an additional participant there is a cost. It is a small cost, but that extra participant adds value to the entire system. You have a larger network of participants. We call that a network externality,” he said.
“We want to try to maximize that by looking at the fee structure, relying less on per-transaction fees and relying more on subscriptions, which are kind of a fixed cost. We hope this will help us maximize network externalities in the payment system and hope this will lead to greater financial inclusion.”
The latest data from the BSP shows that the value of transactions through automated clearing houses InstaPay and PESONet increased by 35.2% to €15.62 trillion at the end of November from a year ago.
Digital payments accounted for 52.8% of retail transaction volume in 2023, up from 42.1% in 2022.
The central bank wants online payments to account for 60-70% of the country’s total retail transaction volume by 2028, in line with the Philippine Development Plan. — Luisa Maria Jacinta C. Jocson