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BSP lifts ban on ATM fee hikes

Published

By Lee C. Chipongian

Banks are now allowed to adjust the fees they charge for automated teller machine (ATM) services after the Monetary Board approved the lifting of a 2013 moratorium order suspending ATM fee hikes.

BSP Deputy Governor Chuchi G. Fonacier. (Bloomberg Photo)

BSP Deputy Governor Chuchi G. Fonacier. (Bloomberg Photo)

Based on Memorandum No. M-2019-020, signed by BSP Deputy Governor Chuchi G. Fonancier last Friday, banks will only have to inform the BSP about their proposed ATM fees based on the costs incurred from these ATM services.

However, Fonacier said that in filing a letter of request with the BSP, a bank’s declared costs “should be clear and adequately supported such that, when deemed necessary, the same may be validated by the BSP onsite.”

Fonacier said that, how much fees to be charged ATM users such as “convenience fees” should “adhere to the pricing principles” set by the BSP in a circular issued in 2017.

In setting fees, the memo said, an acquirer-based charging model will be adopted which means the imposition of fees “arising from agreements among BSFIs (BSP-supervised financial institutions) to fix the fee or have a fix share in fees shall not be allowed.”

The current practice in setting ATM fees is by issuer-based charging method. Under this method, an ATM 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.

The BSP said that banks should provide ATM cardholders “appropriate disclosures” on fees and charges.

“The amount to be charged to a cardholder shall be clearly displayed on the ATM location and on the screen of the ATM terminal. Said amount shall consist of the fees charged by the acquiring BSFI and the network switch. The notice shall clearly indicate that the amount displayed is on top of the charges that may be imposed by the cardholder’s issuer,” according to the memo.

Fonacier said that 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” under BSP Circular No. 980, which detailed the adoption of the National Retail Payment System.

The BSP’s rationale for adopting an acquirer-based charging method was that these acquirers have a significant role in the setting of fees, which is “justifiable considering that off-us transaction costs are substantially incurred by them, such as deployment and maintenance of terminals, cash servicing, ATM monitoring, among others.

“Transaction costs vary from one BSFI to another due mainly to variations in ATM business models, objectives, deployment strategies, ATM cost accounting and pricing scheme. Consequently, ATM fees are also expected to vary from one BSFI to another,” according to the memo.

The memo added that acquirer-based charging “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.”

In 2013, the BSP suspended ATM fee increases because the central bank said at the time that it was not appropriate to implement such additional charges even as they recognized that banks are entitled to cost recovery, but that any fee hikes should be balanced with the interest of consumers.

In 2015, ATM networks agreed to merge and to interconnect the ATM links for a single network. A memorandum of agreement was signed to consolidate BancNet and Megalink, the country’s biggest ATM networks. The consolidation will effectively lower the costs of maintaining ATM services.

At the moment, clients using other than their own bank’s ATM when withdrawing cash are charged P10 per transaction. The banks had wanted to raise fees by 50 percent.

Based on BSP data, as of end-March this year there are 21,682 ATM sites, of which 11,902 are on-site or within banking premises and 9,760 are off-site.

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