Bank of the Philippine Islands eliminated InstaPay transfer fees, according to statements made by president and CEO TG Limcaoco during a media roundtable on Wednesday, July 1. The decision follows Bangko Sentral ng Pilipinas Circular No. 1238, which prohibits banks from cross-subsidizing same-bank and interbank transfer costs. Limcaoco stated the move aims to increase customer activity and retention, as the bank absorbs the approximately P1.50 network switch fee rather than passing it to customers. The regulatory framework requires banks to justify fee differences between on-us transfers (within the same bank) and off-us transfers (to other banks or e-wallets) based solely on network operator costs.
BSP Circular No. 1238 Prohibits Cross-Subsidization Between Transfer Types
BSP Circular No. 1238 establishes a framework preventing banks from using revenue from one transfer type to subsidize another. The central bank stated in a press release that "transfers within one bank or e-wallet are often free," and that "any difference in pricing should mainly reflect fees paid to the network switch operator." Limcaoco explained during the roundtable that under the new rules, banks maintaining free same-bank transfers face two options: charge approximately P1.50 for interbank transfers to reflect the network fee, or maintain higher interbank fees while introducing charges for same-bank transfers.
BPI CEO Explains Infrastructure Cost Allocation
Limcaoco stated that banks incur similar infrastructure costs for both on-us and off-us transfers. "There is a cost to making an on-us and there is a cost to making an off-us," he said. "The costs are your technology, your cybersecurity, your customer service. All those three are for your customer regardless of whether doing an on-us or an off-us." He added that the BSP circular "basically said you cannot have one sector subsidize the other. They're basically saying you have to justify your on-us and your off-us fees." BPI previously cited approximately P22 in processing costs per transfer, factoring in technology, cybersecurity, and customer service systems.
Network Switch Fee Creates Pricing Dilemma for Competitors
The P1.50 network switch fee for InstaPay transactions creates a pricing challenge for other banks. Limcaoco stated: "They have to follow the BSP circular. And the BSP circular says your difference can only be a network fee. So you either go P0 and P1.50, or you go P13.50 and P15, or P8.50 and P10." He added: "That's my view. I don't know if the other banks would agree, but I think the BSP is very clear that the difference has to be the switch fee." BPI determined that charging P1.50 was not financially significant enough to justify customer friction, with Limcaoco stating: "We said, why would we charge P1.50 pa? You're just needling the customer."
BPI Prioritizes Customer Activity Over Fee Income
The bank's strategic rationale centers on increased customer engagement rather than transfer fee revenue. "We think this just generates a lot more customers, a lot more activity, our ability to understand what the customer does," Limcaoco said. "And therefore, we can see if a customer stays with us, we can see what kind of services we can give them, whether it's loans, credit cards, insurance, or deposits." He described the policy as beneficial for financial inclusion, stating: "If banks are willing to give on-us for free, why wouldn't you give the P1.50 also?"
Free Transfers Target GCash Wallet Dominance
Limcaoco stated the policy addresses customer behavior patterns involving GCash, the dominant e-wallet in the Philippines. "One of the things is people have a wallet. My wallet is BPI. So all the money comes out of BPI. But some people, their wallet, because of the pervasiveness of GCash, their wallet is GCash," he said. He explained that at P15 transfer fees, customers "send a huge amount to GCash and then disperse from GCash. Hopefully, if it's free now, people just disperse from their BPI." GCash's parent company Mynt was founded as a partnership involving Globe Telecom, Ayala Corp, and Ant Group, while BPI is also part of the Ayala group. Mynt is preparing for what is described as potentially the Philippines' largest initial public offering.
FAQ
What did BPI announce regarding InstaPay transfer fees?
BPI eliminated InstaPay transfer fees for transfers from bank accounts to other banks or e-wallets, as announced by CEO TG Limcaoco during a media roundtable on Wednesday, July 1. The bank now absorbs the approximately P1.50 network switch fee rather than charging customers.
Why did BSP Circular No. 1238 prompt BPI's decision?
BSP Circular No. 1238 prohibits banks from cross-subsidizing same-bank and interbank transfer costs. The regulation requires that pricing differences between on-us and off-us transfers reflect only the network switch operator fee, which Limcaoco stated is approximately P1.50 for InstaPay transactions.
How does BPI's free transfer policy affect GCash usage patterns?
Limcaoco stated that customers previously transferred large amounts to GCash at P15 per transaction, then dispersed payments from the GCash wallet. BPI's free transfer policy aims to retain customers within the BPI ecosystem by eliminating the cost incentive to route payments through GCash first.
