EXPLAINER: Why ATM fees will change soon (and may even go down)

MANILA, Philippines – The banking public negatively reacted over news that automated teller machine (ATM) fees may go up by as much as 50%, after the Bangko Sentral ng Pilipinas (BSP) issued a memorandum which lifted a 2013 freeze order on fees.

Makati City 2nd District Representative Luis Campos Jr filed a resolution to probe the issue, as banks have long been wanting to raise ATM fees.

"We are worried that the forthcoming increases in ATM charges might harm consumers – the nation's more than 58 million ATM cardholders," Campos said.

Prevailing ATM fees range from P11 to P15 for single interbank withdrawals and P2 per interbank balance inquiry.

However, BSP officials clarified that banks cannot raise fees on their own and any changes need approval from the central bank.

What is the memorandum all about? Last July 19, the BSP issued memorandum M-2019-020 or the lifting of the moratorium on ATM fees.

The latest issuance is a result of the review of another memorandum, M-2019-044, issued in September 2013, which essentially barred banks from raising or reducing ATM fees following an industry-wide adjustment.

The latest memorandum specified that banks should file a request with the BSP indicating their proposed ATM fees, as well as the costs incurred with respect to ATM-related activities.

Moreover, it said that banks should adhere to an acquirer-based charging model, where the fees would vary depending on the ATM terminal being used.

The ATM's screen should display the charges, especially if the ATM card is from another bank. Cardholders should also have the option to cancel the transaction if he or she does not wish to pay the fee or believes that other ATMs nearby offer lower rates.

Any changes in fees must be approved by the BSP.

Why was the moratorium lifted? BSP Deputy Governor Chuchi Fonacier said this was based on the expenses of banks in maintaining ATM services.

She said banks have varying strategies and costs in maintaining ATMs, hence the need to review rates on a case-by-case basis.

Fonacier further explained that ATMs which are located in far areas with less people are harder to maintain. An example of this is an ATM located in a rural area with security problems.

Meanwhile, Vicente de Villa III, BSP officer-in-charge of the financial technology subsector, said the central bank will thoroughly review banks' expenses in maintaining hardware and software, as well as security and cash loading costs.

The acquirer-based charging model also allows banks to directly compete with one another, which means they may even offer lower fees than other ATMs.

"This therefore introduces a competitive discipline that can bring about efficiencies in the Philippine ATM system," the BSP said.

With banks having the option to raise fees, Fonacier said this would encourage them to set up in underserved and less dense areas and make ATMs more accessible to the public.

How many banks applied for new rates? How much? Villa said less than 10 banks have so far applied for higher ATM fees, and are now under evaluation.

He said it will take the BSP 20 days to go through each bank's application.

Meanwhile, there is at least one "big" bank which applied for lower rates. Villa reiterated that the lifting of the moratorium is not just for higher fees – it also gives banks an option to strategize and lower their rates.

The BSP officials did not name the banks which submitted proposals, or their proposed rates.

Fonacier said she does not see withdrawal fees hitting as high as P30, but only a little above P15 at most. – Rappler.com

Ralf Rivas

A sociologist by heart, a journalist by profession. Ralf is Rappler's business reporter, covering macroeconomy, government finance, companies, and agriculture.