MANILA, Philippines – The P10 or P15 transfer fee for moving money between banks is finally disappearing, but why is it only happening now?

As of Friday, July 17, at least 14 universal and commercial banks had waived both InstaPay and PESONet fees for individual customers, according to the Bangko Sentral ng Pilipinas (BSP). The list includes the big players: BDO, BPI, Metrobank, UnionBank, Landbank, PNB, Security Bank, RCBC, China Bank, and EastWest.

The zero-fee wave followed BSP Circular No. 1238, which changed how financial institutions may charge for person-to-person transfers. Basically, if sending money to another account within the same bank is free, then sending it to a different bank should just reflect the additional switch cost. For InstaPay transfers, that switch cost is around P1.50.

Since most banks already make transfers within their own systems free, the old P10 to P25 fee became harder to justify. Banks could theoretically begin charging for same-bank transfers. Many instead decided that collecting such a small interbank fee was not worth irritating customers.

Why now?

The BSP is worried that the Philippines’ rapid shift toward digital payments may be losing momentum.

Digital payments accounted for 57.4% of monthly retail transactions by volume in 2024, up from 52.8% in 2023. That was still an improvement, but the increase slowed to 4.6 percentage points – less than the double-digit 10.7-point jump recorded a year earlier.

This rate of digitalization is simply not fast enough if the government wants to hit its goal of making digital payments account for 60% to 70% of retail payments by 2028.

BSP Deputy Governor Mamerto Tangonan said high fees have persistently ranked among the main reasons some Filipinos don’t use digital payments, alongside unreliable internet.

“That’s why this calls for urgent action. For the first time, we only grew by single digits,” Tangonan told reporters on Monday, July 20. “If we don’t do anything, don’t expect a different result. That’s why we have to do something. We have to continue. Malayo pa tayo (We’re still far from the goal).”

It should come as no surprise then that some bank executives told him that transactions and customer onboarding surged within a week of their fee waivers, although he said it was too early to tell whether the increase would last.

And though the BSP only rolled out this regulation now, the policy was years in the making. During the pandemic, the central bank persuaded institutions to temporarily waive fees, but the charges returned afterward. It later pursued free transfers to micro-merchants through voluntary arrangements and transaction thresholds of P1,000 and P500.

Those compromises produced new problems. Policies differed across institutions, confusing customers. People also split larger payments into smaller transactions to stay below the threshold, causing transaction counts to rise without a similar increase in value. A proposal to grant customers 10 free transactions a week encountered industry resistance.

After those attempts failed to move the entire market, the BSP shifted to the cost-based mechanism now forcing institutions to reconsider whether transfers should remain a source of profit.

The end of the transfer-fee model?

Transfer fees will not necessarily disappear everywhere immediately. Circular No. 1238 does not simply order every institution to charge zero. But it puts pressure on the long-standing model of earning whenever a customer moves money outside a bank or e-wallet.

“Ever since transfers came about, the model early on has been to earn from the transfer fees,” Tangonan said.

“We would like to encourage the industry to move up to that level instead of just doing transfers,” the deputy governor added, referring to offering other financial services such as investments, savings products, and credit to the financially underserved.

For Tangonan, financial firms should “evolve” by making up any lost fee revenues by offering deeper services instead: better savings products, responsible credit, insurance, and investments accessible to ordinary Filipinos. Transfers would become a basic gateway for attracting and retaining customers rather than the product being monetized.

One other valuable asset is the data generated by those payments. Tangonan said transaction histories can show where money comes from, how much a customer retains, and where it is spent. Banks and their partners could use that information to assess borrowing capacity or offer more suitable financial products. (READ: [Finterest] How your e-wallet history could help you get a cheaper loan)

What comes next?

The BSP still has unfinished work.

Tangonan said most of the top 20 banks and e-wallet providers have complied, but some still had “room for improvement.” The central bank is reviewing their itemized costs and explanations.

Among the financial institutions that have yet to fully comply with the circular are GCash and Maya, who have lowered their fees but still charge P10 for InstaPay transfers. The BSP is still in talks with these providers.

For consumers, Tangonan’s advice is to take advantage of freer movement while some fees still remain.

“That is the beauty of funds or money being able to move freely in the network gives the public the choice,” Tangonan said. “Madali na kasi ngayon. Pangit ang deal dito, eh libre mo i-move doon (It’s easy now. If the deal is bad here, well, it’s free to move your money there).”

If another institution offers a better deposit rate, loan price, or service, customers can increasingly open an account digitally and transfer their money without paying a toll. In theory, this forces banks to compete for the customer’s entire financial relationship instead of relying on transfer friction to keep money in place.

Tangonan also emphasized that they must also build the other half of the market, which is the merchant marketplace where customers can spend digitally. The less-noticed second part of Circular No. 1238 simplifies onboarding for low-risk merchants, including informal businesses that may lack income tax returns or full business permits.

Lower fees could bring millions more consumers ready to pay digitally. But if the neighborhood barber, market vendor, or sari-sari store can’t accept the payment, the BSP reasoned that cash will still keep its hold. – Rappler.com