Banks waiving fees for retail fund transfers to comply with new central bank rules may slightly reduce revenues but could ultimately boost profits through higher transaction volumes and improved customer retention.
The central bank circular, effective July 4, requires banks, e-wallets, and other payment providers to adopt reasonable, fair, and market-based pricing for digital person-to-person transfers.
Most universal, commercial, thrift, and digital banks have eliminated InstaPay and PESONet fees, while several e-wallets reduced inter-institution charges.
Eliminating these fees strengthens traditional banks' position as payment channels amid competition from digital banks and fintech firms.
Analysts note the move improves banks' relevance, market profile, and client relationships while supporting financial inclusion goals during elevated inflation.
Fee waivers present a modest headwind to profitability for institutions reliant on transaction income, but promote financial inclusion and long-term customer acquisition.
Internal data indicates zero-fee retail transfers could reduce big banks' revenues by about 1%, with profit impact ranging from 1% to 3%.
Banking system net profit rose 2.87% to P104.82 billion in the first quarter, while fee and commission income grew 6.8% to P47.62 billion.
Market analysts describe the earnings threat from fee waivers as negligible, citing resilient net interest margins and deposit-accretive effects.
For universal and commercial banks, transfer fees represent a small revenue share relative to lending and other businesses, with deeper engagement offsetting lost income.
Central bank data shows digital transaction volume increased by up to 50% after institutions removed transfer fees.
Smaller thrift and rural banks with less diversified revenue may feel greater pressure from the fee elimination.
Impact varies by reliance on transaction fees and ability to leverage free transfers for customer acquisition and retention.
Digital banks may lose a competitive edge since many already offered free transfers before the directive as a customer acquisition strategy.
With traditional banks matching free transfers, differentiation now depends on deposit rates, user experience, rewards, and product offerings.
Reduced friction in inter-institution transfers may increase deposit mobility and intensify competition for funds.
Analysts do not expect significant deposit shifts from digital to traditional banks solely due to free transfers, as rates and convenience remain primary drivers.
The rules level the playing field, pushing institutions to focus on building and monetizing customer relationships rather than transfer fee income.
The heightened competition centers on deposits, wallet share, and long-term engagement rather than lost fee revenue.
The central bank targets digital payments at 60% to 70% of retail payment volume by 2028 under the national development plan.
In 2024, digital payments comprised 57.4% of monthly retail transaction volume and 59% of total value, up from prior-year levels.
