Stiff competition lowers remittance fees by 35% - BSP

Stiff competition among money transfer agents and the entry of players charging low fees brought the cost of money transfers down by as much as 35 percent, the Bangko Sentral ng Pilipinas said Tuesday. Market leader Western Union cut its transaction charges by some 35 percent as a new breed of competitors started using mobile technology to their advantage, Bangko Sentral Deputy Gov. Nestor Espenilla Jr. said in an interview with reporters Western Union is now charging clients as low as P65 per P1,000 of domestic remittances from more than P100, according to Espenilla. E-money issuers like Globe Telecommunications' GCash and Smart Communications' Smart Money have given Western Union and banks and other established money transfer agents a run for their money with the reliability and speed of transferring money using a mobile phone for much less cost, Espenilla said. At the start of the e-money revolution in the Philippines, regulators expected transaction costs to drop and decided not to interfere with price structures by letting market forces arrive at the most ideal rate, according to Espenilla. "That is why we don't want to regulate and impose a price cap. Rather than price cap, let competition come in," he added. GCash and Smart Money charge customers 1percent per P1,000 transaction, with the money sent in an instant to where clients want, Espenilla said. “It used to be that money transfer agents charge a fixed fee regardless of amount sent. Now they just charge you 1 percent, and this is how competition is shaping the industry," Espenilla said. As most Filipinos are text-savvy, e-money transaction is the ideal for the Philippines, the deputy governor said. There are about eight million users of mobile banking in the country, boosting central bank efforts to provide far-flung rural area with low-cost and highly efficient financial services, the Bangko Sentral said. The number of rural banks that offer mobile banking services to microfinance operations now total 49 from zero in 2004, according to Espenilla. The mobile phone industry serves all income groups, especially low-income groups, and more than 75 percent of the population has mobile phones. Consumers, particularly families of overseas Filipino workers, are starting to appreciate the use of electronic transactions. In regulation it issued covering e-money service, the Bangko Sentral said that money transfer agents must register with the central bank as an electronic money issuer or EMI. Banks, non-bank financial institutions, money transfer agents, and stock corporations with a minimum paid-up capital of P100 million are qualified as EMI. The central bank said that e-money is not a bank deposit, and that transactions are not covered by deposit insurance under the Philippine Deposit Insurance Corp. The guidelines also limit the maximum amount that can be transacted to P100,000 a month. Data from the Bangko Sentral showed that OFW remittances grew by 5.6 percent to a record $17.35 billion last year from $16.43 billion in 2008. OFW remittances went up by 6.6 percent to $5.87 billion from January to April this year from $5.498 billion a year earlier. —VS, GMANews.TV