Taxwise Or Otherwise

For those who dare to do their Christmas shopping at the eleventh hour, the ordeal of treading through Manila’s urban jungle is not for the faint-hearted. Lest one is not forewarned, it is wise to start Christmas shopping early, steering clear of the horrendous rush that can risk spoiling the holiday spirit.

But what if you run out of cash while shopping and your bank’s Automated Teller Machine (ATM) is far from your location? The tendency is to grab cash from the nearest ATM of any other bank, not minding the additional P10 to P15 ATM transaction fee charged to you. After all, searching for your bank’s ATM may entail more cost and inconvenience than paying the ATM fee. But how much do we understand about this fee? Before you insert your card and hit that withdraw button, let me share with you some information about the charges on transactions done via ATM.

With the use of an ATM/debit card, cardholders can easily withdraw money, check their account balance, and even transfer money to other bank accounts or users in just a few clicks. However, there is a price to pay for banking convenience. While not charged by the issuing bank’s ATM terminal (“on-us” transactions), cardholders pay an ATM fee for withdrawals made with another bank (“off-us” transactions) to cover the operational costs of processing.

In 2013, due to the noted industry-wide adjustment in ATM fees, the Bangko Sentral ng Pilipinas (BSP) released a memorandum instructing all banks to maintain the status quo in terms of both service fees and connectivity arrangements concerning their ATM network. The directive was to allow the BSP to conduct a review, in consultation with the banking industry, of the disclosure practice, competition policy, and consumer protection issues applied by the banks to their ATM transactions.

Six years later, in line with the results of the review and the actions taken by the industry, the BSP issued Memorandum No. M-2019-020 on July 19, lifting the moratorium imposed on the ATM fees, subject to the following guidelines:

1. Each participating BSP-supervised financial institution (BSFI) shall file a letter request with the BSP indicating their proposed ATM fees, as well as the costs currently incurred by the BSFI for its ATM activities;

2. Costs declared should be clear and adequately supported, such that when deemed necessary, the same may be validated by the BSP onsite;

3. Setting of fees, including convenience fees, shall adhere to the pricing principles provided under BSP Circular No. 980 dated Nov. 6, whenever applicable;

4. The Acquirer-Based Charging model should already be adopted. To ensure effective implementation of the model, the imposition of fees arising from agreements among BSFIs to fix the fee or have a fixed share in fees shall not be allowed; and

5. Appropriate disclosures on ATM fees shall be provided to the cardholders. The amount to be charged to a cardholder shall be clearly displayed at the ATM’s location and on the screen of the ATM terminal. This is to consist of the fees charged by the acquiring BSFI and the network switch. The notice must clearly indicate that the amount displayed is on top of the charges that may be imposed by the cardholder’s issuer.

Before the issuance of the memorandum, the industry practice on charging ATM fees was the Issuer-Based Charging Method. Under this method, the ATM fee is set and charged by the issuing bank. The amount charged to the cardholder remains the same regardless of the ATM acquiring bank (i.e., the owner of the ATM terminal where the cardholder transacts). The issuing bank shall then pay an interchange fee from the ATM fee collected. Any difference in the amount of the ATM fee and the interchange fee is considered as revenue to the issuing bank and is commonly referred to as Issuer’s Fee. Accordingly, related costs incurred by the issuing bank, such as in the case of reconciliation and fraud-related losses, are charged against the fee.

On the other hand, under the Acquirer-Based Charging Method, the amount that will be charged to the cardholder will vary depending on the ATM terminal used. The fees are to be set by the acquiring bank while the issuing bank, at its option, may likewise charge a separate fee, provided this is properly disclosed to its cardholders. The cardholder is allowed to cancel the transaction if he does not wish to pay the fees, such as may be the case if he believes that an ATM charging a lower fee may be situated nearby.

Based on the memorandum, the acquirer-based charging method allows the ATM owners to directly compete for business with one another by disclosing fees and offering lower charges than other ATMs in the vicinity. This policy introduces a competitive discipline that can bring about efficiencies in the Philippine ATM system which favors the consumer. In line with this, the BSP issued a reminder that BSFIs should ensure adherence to the principle of reasonable and market-based pricing provided under BSP Circular No. 980.

A few months after the lifting of the moratorium, news came out that some banks had won the approval of the BSP to increase their ATM fees but only up to P3 per transaction on average. While it may seem to be a relatively small amount for some, this is not the case for everyone, especially those earning a lower income.

It seems unwise to pay fees for just taking out your own money; after all, it is the depositor’s money that fuels the banking business. Nonetheless, additional fees can be avoided if you plan where and when to make a cash withdrawal and stick with ‘on-us’ transactions. You may also opt to go cashless since many establishments have long been accepting electronic payment transactions. Better yet, stay within your budget to avoid overspending. It’s your hard-earned money, so spend it on necessities or things that matter the most.

The content is for general information purposes only, and should not be used as a substitute for specific advice.


Nestine P. Buisan is a Senior Associate at the Tax Services Department of Isla Lipana & Co., the Philippine member firm of the PwC network.

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