BSP considering subscription fee on digital transactions

Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. (Photo from BSP’s Facebook page)

MANILA, Philippines – Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said the central bank is considering a subscription fee model for digital transactions.

“If you look at the payment system, every time you add one more participant, that’s a cost. It’s a small cost, but that extra participant adds value to the whole system. You have a bigger network of participants. And so that’s what we call a network externality. And we want to try to maximize that by looking at the fee structure, rely less on fees per transaction, and rely more on subscriptions, which is kind of a fixed cost,” Remolona said during a Rotary Club event in Makati City on Thursday.

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“And we hope that will help us maximize network externalities in the payment system and hope that this will lead to greater financial inclusion,” he added.

The BSP earlier said it is pushing for the removal of transaction fees for person-to-person electronic fund transfers and payments to small businesses in a bid to boost digital payments.

“As you know, the situation now is between an individual and a merchant. The merchant pays the fees. So the individual doesn’t see it but it’s made part of the price that the person pays. Between persons—between individuals—we’re thinking about making that zero. No fees between up to a certain threshold. We haven’t determined the threshold,” Remolona said.

Remolona, however, said that “there’s some more fundamental issue.”

“It’s not about the fees per transaction. I think that’s the wrong model,” he said.

“Because of what we call network externalities, there should be a subscription fee, which is fixed rather than a fee per transaction. So we’re still trying to figure out how exactly to do that. We’re talking to the, you know, we’re talking to GCash, we’re talking to Maya, we’re talking to all the participants and we’re gonna agree on something,” Remolona added. (PNA)