Not similarly situated

Earlier this month, a Bangko Sentral ng Pilipinas circular mandating BSP-supervised financial institutions (BSFIs) to adopt reasonable and cost-based pricing for digital transfers took effect.

Transferring Philippine peso funds electronically from one participating BSFI account to another, which includes banks, e-money issuers or mobile money operators, is done via InstaPay and PESONet, electronic fund transfer services established as part of the National Retail Payment Systems initiative of BSP that seeks to promote electronic payments.

InstaPay allows transfers of up to P50,000 per transaction, making the funds available to the recipient almost immediately while PesoNet allows transfers of any amount per transaction but the funds are received the same day subject to cut-off times.

BSP Circular 1238 series of 2026, which took effect last July 4, required BSFIs to adopt a reasonable and fair-market based mechanism adequately supported by an analysis of the actual costs incurred in delivering electronic payment products and services.

Immediately, a number of universal banks announced free electronic money bank transfers to other banks or e-wallets. These include BPI, RCBC, LandBank, PNB, BDO, Metrobank, PSBank, Security Bank and EastWest Bank.

Other digital finance players have also joined, with Maya reducing its InstaPay transfer fee to P10 and GCash cutting its charge also to P10 from P15.

Banks could have done this a long time ago.

Removing interbank transfer fees would hardly make a dent on their revenues. Banks earn most of their revenues from non-fee income such as loans and deposits. One business model comparison shows banks deriving roughly 87 percent of revenues from non-fee income and only about 13 percent from fees. The same comparison shows universal banks with a net income margin of 33 percent.

Banks are therefore in a position to absorb lower, even zero transfer fees.

But electronic wallets are not similarly situated as banks.

The role of e-wallets in making digital payments and cashless transactions mainstream in the Philippines is well documented. Many Filipinos were previously outside the formal banking system, but e-wallets served as a primary catalyst for financial inclusion by lowering the barrier to entry for marginalized groups, the unbanked and underbanked populations by eliminating extensive paperwork and documentary requirements and minimum balance requirements just to open a bank account.

During the pandemic, e-wallets surged in popularity as Filipinos could avail themselves of goods and services, pay utility bills, and more, without leaving home.

The move to lower if not totally scrap electronic money transfer fees unfortunately threatens the very existence of these non-bank entities.

Banks and e-wallets do not have the same financial structure. E-wallets and non-bank electronic money issuers (EMIs) rely much more heavily on fees and commissions. Unlike banks that derive only 13 percent of their income from fees, EMIs source around 90 percent of their earnings from fees and commissions. And while universal banks post net income margins of 33 percent, most EMIs are still operating at a loss.

Banks are in a position to absorb lower transfer fees because they have broader balance-sheet income and other regulatory advantages, including lower reserve requirements that support their earning capacity. Wallets do not enjoy those same advantages.

One EMI explained that at the same time, inclusion in the Philippines has depended heavily on offline cash-in and cash-out rails. Around 43 percent of users who cash in do so through offline channels, and these channels are over-indexed in Visayas, Mindanao and lower-income segments.

Those offline rails need to be funded. A cost breakdown shows that 65.06 percent of offline-channel costs are covered by subsidy from the e-wallet operator, while 34.94 percent comes from revenue from bank transfers.

A one-size-fits-all zero-fee rule may sound consumer-friendly, but in practice, it can weaken the very services that helped expand financial inclusion.

The same EMI pointed out that digital transfers are not costless to provide. They require investment in platforms, cybersecurity, fraud prevention, compliance, interoperability, customer support and ongoing upgrades.

That is why fee revenues matter. These revenues help fund better technology, stronger security, improved reliability and continued product innovation. If that revenue is abruptly removed, the likely result is not a magically cheaper system, but a weaker one with fewer incentives to improve and fewer resources to maintain quality and resilience.

This effect is especially significant for e-wallets because they are much more dependent on transaction-based revenues than banks. A rigid zero-price rule therefore does not affect all players equally. It places far more pressure on the providers that are still investing heavily to build access and trust among mass-market users, the EMI explained.

The BSP has an important oversight role and should review whether fees are fair and reasonable. But it should not compel e-wallets to operate without a sustainable profit model. There is an important difference between ensuring reasonableness and effectively compelling e-wallets not to earn a profit from a core service that they rely on to sustain their business or regardless of the underlying cost.

Businesses that expand access, invest in technology, manage fraud, maintain compliance and build inclusion infrastructure must remain sustainable if they are to keep serving the public well.

Investors fund payment platforms because they expect a reasonably stable regulatory environment where firms can recover the cost of building infrastructure, onboarding customers and developing new services. If a core revenue stream can be eliminated before the market has fully matured, investors may conclude that future investment in the sector is too uncertain.

That matters because the country still needs more investment in inclusion, not less. If the rules discourage investment too early, the result may be fewer improvements, fewer innovations and slower progress for the very users the system is supposed to help.

This is especially important in a market where financial inclusion is still being built, not merely optimized. Undermining the economics of the system too early prevents the ecosystem from fully delivering on the promise of digital finance.

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