BSP presses GCash, Maya on P10 transfer fees: Explain!

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The Bangko Sentral ng Pilipinas (BSP) has spent July dismantling the fee barriers that banks once placed between their apps.

The campaign has worked surprisingly well. As of Friday, July 17, at least 14 universal and commercial banks were offering free InstaPay transfers, including BDO, BPI, Metrobank, Landbank, UnionBank, and RCBC. The top biggest banks already account for about 90% of transaction volume.

Now comes the elephants still standing in the payments room: GCash and Maya.

The country’s two biggest e-wallet brands continue to charge P10 for InstaPay transfers to other banks and wallets, even as transfers within their respective ecosystems (e.g. GCash-to-GCash or Maya-to-Maya) remain free.

To be fair, both have already given customers a small win. GCash cut its fee from P15 to P10 effective July 4, while Maya made the same reduction effective July 6.

What does the BSP think? Good job with the discount, but there’s still some explaining to do.

Still talking, still calculating

GCash and Maya have already submitted itemized breakdowns of the costs behind their fees, according to BSP Deputy Governor Mamerto Tangonan. The central bank is now combing through it.

“If they’re able to explain it and justify that they’re directly associated with switching, so be it,” Tangonan told reporters on Monday, July 20.

Tangonan said the BSP would first write the institutions with its findings. The e-wallets may respond with further explanations before the central bank makes a final determination and, if necessary, issues a directive.

So, could the e-wallets’ fees drop soon? Don’t hold your breath.

“Give us time,” Tangonan said. “Don’t expect a result next week because this will take an exchange of information.”

Tangonan declined to promise a July or August deadline.

“Mahirap lagyan ng timeline (It’s hard to put a timeline),” Tangonan said. “We cannot cut the process short just because we are in a hurry given that this has also large repercussions. So, we want to be circumspect about it. Be fair and follow due process. Listen to them. And then we make a determination.”

Still, the wallets shouldn’t mistake the BSP’s politeness for a retreat. Asked directly whether e-wallets would ultimately have to bring their fees down or restructure them, Tangonan was clear.

“Of course, we expect compliance with the circular,” Tangonan said.

One set of rules for all

GCash and Maya may argue that e-wallets have a different cost structure from traditional banks. Unlike large banks, wallet operators may depend more heavily on transaction-related revenue to maintain infrastructure, cybersecurity, and services for customers who might otherwise be financially underserved.

Tangonan doesn’t believe that this should let them play by different rules. The BSP is wary of regulatory arbitrage. Put simply, this means companies could structure transactions or even corporate arrangements to fall under whichever set of rules favors them. For example, a bank could be tempted to route services through an e-wallet affiliate if wallets were given more leeway with fees.

“It is the plumbing of the financial system,” Tangonan said. “You will reduce the actual flow that you get because there are some bottlenecks… We don’t want to do that in a network. We want to protect the interoperability of the network.”

“I’m not saying [they will do it], but it might cause an arbitrage if you have a different regulation for this type of player and a regulation for that type of player,” he said. “Mahirap na ‘yun (That’d be difficult).”

BSP’s not-so-subtle revenue hint

What, then, should GCash and Maya do with the revenue they stand to lose?

The BSP stopped short of telling them where to “bawi” (recover) the money. But they do see a clear path for other revenue sources.

Tangonan noted that e-wallet apps have already evolved far beyond basic money transfers. Their users can access savings accounts, loans, merchant services, and other financial products provided either directly or through partner institutions.

“There are commercial benefits there. Hindi naman given for free (It’s not given for free),” he said.

Payments data can also help platforms assess a user’s capacity to borrow, Tangonan said. Regular salary discretionary spending, and the amount left after expenses can produce a richer credit profile than traditional documents alone.

As transactions rise now that transfers are free, e-wallets could use these richer transaction histories to improve credit assessment and offer more relevant products within the platform.

When a reporter at the briefing interpreted this as the BSP telling wallets to earn elsewhere, Tangonan jokingly pushed back in Filipino: “You said that, not me.”

Three options left

So, what’s left for GCash and Maya to do? Under the BSP’s framework, the two e-wallet giants appear to have three realistic choices.

The most customer-friendly option is to make InstaPay transfers free or reduce the charge to roughly the direct switching cost, while keeping transfers within the same wallet free.

The second option is much more tricky. If they want to preserve the P10 transfer fee, they would need to start charging a fee of around P8.50 on GCash-to-GCash or Maya-to-Maya transfers, assuming the additional switch cost is about P1.50. As you might imagine, this wouldn’t sit well with even the most loyal e-wallet users.

“If you want to protect the P10, then you have to raise the transfers within the same institution to, let’s say, around P8.50. If you don’t want to do that, you bring down your interbank transfer,” Tangonan said.

The third option is to convince the BSP that expenses beyond the basic switch charge are directly and unavoidably attributable to inter-institution transfers. That’s precisely what the submitted cost breakdowns are supposed to establish. But the central bank already knows how much switching costs, so the e-wallets would have to make a strong case.

All of this is unfolding just as both fintech giants are polishing their profitability stories for potential investors. Mynt, the parent company behind GCash, has already moved toward a possible stock market debut. Maya has likewise alluded to a possible listing.

Who will make the first move? – Rappler.com