The Bangko Sentral ng Pilipinas (BSP) and the Association of Bank Remittance Officers (ABROI) have agreed in principle to reduce fees on fund transfers.

Talks have been ongoing for months now but BSP Deputy Governor Armando L. Suratos said the memorandum of agreement is being finalized for signing by the end of this year.

“There is an agreement in principle with banks to standardize and reduce their back-end processing fees,” Suratos said. “We expect to implement (this) upon signing of the MoA.”

The central bank is encouraging ABROI bank members Banco de Oro Unibank, Metropolitan Bank & Trust Co., Bank of the Philippine Islands, Philippine National Bank, Land Bank of the Philippines, Rizal Commercial Banking Corp. and China Banking Corp. to course remittances through its Philippine Payments and Settlements Systems (PhilPaSS). BSP cut fees to P5 per transaction as sweetener.

Suratos said the central bank has lowered the charges on remittances for those that are credited to bank accounts of the beneficiaries in banks that are not their receiving banks.

At the moment, BSP is talking with both ABROI and the Bankers Association of the Philippines to standardize the back end processing fees. The result of these discussions is to bring down the costs of remitting funds.

At the moment, banks processing fees for remittances cost P125 to P250 per transaction since banks still use third parties to remit the cash to the beneficiaries for same day deliveries. By using the PhilPaSS system, the remittances can be received within the same day at lower costs.

The BSP has been encouraging Filipino migrant workers to send fund transfers through banks because it is cheaper and safer than door-to-door or other informal channels of remitting their hard-earned cash.

In a 2005 survey, service charge by “credit to account (bank)” arrangement is proven cheaper compared to door-to-door, which has the highest service charge in the fund transfer business.

The study enumerates the different remittance types. One, which the BSP recommends, is the credit to account type where an OFW and his beneficiary have a bank account with remitter-bank and remittance is credited directly to that account.

Another type is crediting other local bank where an OFW/beneficiary has a bank account with another local bank different from the remitter bank and remittance is transferred or credited to that account by the remitter bank.

Fund transfers are also transacted through door-to-door where an OFW sends remittance to a local bank, which, in turn, delivers the money to the beneficiary at his address. The last of four popular modes of remitting cash is the so-called advice and pay, where an OFW sends money to the local remitter bank and the beneficiary is then advised of the remittance and collects it from the bank.