By Melissa Luz T. Lopez, Senior Reporter
OFFERING real-time digital payment services is credit positive for Philippine banks, Moody’s Investors Service said in a recent report, with the free flow of funds across lenders seen to trim operating costs and leave bigger bottom lines.
The global debt watcher said the InstaPay platform launched by banks and e-money issuers in the Philippines will boost the overall soundness of the local financial system.
Launched last month, InstaPay clears electronic fund transfers worth up to P50,000 per transaction and without a daily limit. The platform is available 24/7, with the funds to be made available to receivers almost immediately.
“The establishment of InstaPay is credit positive for the Philippine banking system because it will improve the retail payment efficiency for participating banks and help promote financial inclusion,” Moody’s said in its credit outlook published last week.
“[T]he banks’ weak cost efficiency limits their internal capital generation.”
Cost-to-income ratios of Philippine banks range from 50-75%, which Moody’s said is the highest compared to peers in Southeast Asia. High operating costs stem from setting up new bank branches to keep up with rapid growth in consumer lending.
Philippine banks spent P377.149 billion for their 2017 operations to generate a net profit worth P590.785 billion to post a 63.84% cost-to-income ratio, according to central bank data.
In particular, the credit rater pointed out that having the InstaPay service “reduces reliance on physical branches and ATMs (automated teller machines) to make transactions,” providing more convenient means for clients to access money at cheaper cost to financial firms.
As of April 23, seven banks are able to send and receive funds within seconds, while 11 other lenders and two e-wallet providers are equipped to receive interbank transfers via InstaPay.
“We expect the participating banks to realize cost savings as the new payment system’s penetration across the country increases. The banks can cut down on processing and branch operating costs as more transactions go through the digital channel,” Moody’s said.
InstaPay is also seen as a tool towards bringing more Filipinos into using formal financial channels and owning bank accounts, as digital transactions are easily accessible via mobile phones compared to the need to visit bank branches.
Only 34.5% of Filipino adults owned a bank account as of 2017, according to the latest Global Findex report. Around 41% of the unbanked segment cited distance to financial institutions as the main barrier to owning formal accounts.

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