MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) has reminded banks to adhere to the principles of reasonable and market-based pricing for fees imposed on automated teller machine (ATM) transactions.
BSP Deputy Governor Chuchi Fonacier has issued a memorandum reminding BSP-supervised financial institutions (BSFIs) about the shift to the acquirer-based charging model from the issuer-based charging method.
“While the BSP does not directly intervene in the prices of BSFIs’ products and services as a matter of policy, the BSFIs are reminded that it is their responsibility to ensure adherence to the principles of reasonable and market-based pricing,” Fonacier stated in the memo issued last July 19.
She said the BSP issued Resolution 661 in April last year calling for the lifting of a moratorium on ATM fees imposed in September 2013 under Memorandum M-2013-044 that imposed a status quo in terms of both service fees and connectivity arrangements.
The resolution, she said, called for the adoption of an acquirer-based charging method wherein the amount to be charged to a cardholder shall vary depending on the ATM terminal being used.
The regulator said the method allows ATM owners to directly compete for business with one another by disclosing fees and offering lower charges than other ATMs in the vicinity.
“This, therefore, introduces a competitive discipline that can bring about efficiencies in the Philippine ATM system,” the BSP said.
Under the issuer-based method, the fee is set and charged by the issuing bank and the amount charged to the cardholder remains the same regardless of who the ATM acquiring bank is.
Although not disclosed to the cardholder, the issuing bank is obligated to pay an interchange fee from the ATM fee collected. Any difference in the amount of the ATM fee and the interchange fee is considered as revenue to the issuing bank and is commonly referred to as issue fee.
Accordingly, related costs incurred by the issuing bank, such as in the case of reconciliation and fraud-related losses, are charged against the said fee.
To ensure the effective implementation of an acquirer-based charging method, the imposition of fees arising from agreements among BSFIs to fix the fee or have a fix share in fees is no longer allowed.
The BSP said the setting of fee should not be determined by the issuing bank and should largely depend on fees set by the acquiring bank and network switch.
Furthermore, the issuing bank could likewise charge a fee provided that the same shall be properly disclosed to its customers and cardholders.
“Appropriate disclosures on ATM fees and charges shall be provided to the cardholders. The amount to be charged to a cardholder shall be clearly displayed on the ATM location and on the screen of the ATM terminal,” Fonacier said.
According to Fonacier, banks are required to file a letter request with the BSP indicating their proposed ATM fees as well as the costs currently incurred with respect to its ATM activities.
Fonacier said added costs declared should be clear and adequately supported, such that when deemed necessary, the same may be validated by the BSP onsite.