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BSP study shows remitting via banks cheaper than door-to-door |
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by LEE C. CHIPONGIAN
The Manila Bulletin 08/08/2005 Bangko Sentral ng Pilipinas Amando M. Tetangco Jr. is encouraging Filipino migrant workers to send fund transfers through banks, which is cheaper and safer than door-to-door or other informal channels of remitting their hard-earned cash. "We also intensify efforts to reduce the cost of remitting funds, which is a positive development for the banking system," Tetangco told reporters over the weekend. Based on a survey conducted in May this year, 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. Tetangco cites a survey presented by the Association of Bank Remitting Officers Inc or ABROI, which said that one of the factors that reduces the cost of remittance is market competition. In the last five years, the survey said service charges have narrowed from 4.35 percent in 2000 to 1.50 percent this year. The study enumerates the different remittance types. One which the BSP recommends is the credit to account type where an OFW and his beneficiary has 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 socalled 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. Right now remittances, which have reached $4 billion in the first six months for the year, mostly come from the United States, United Kingdom and Hong Kong. According to the ABROI survey, charges for remittance from San Francisco to Manila ranged from $6 to $17 in 2000. In 2005, this has narrowed to a range of $6 to $14. The average amount for remittance per transaction was $400. The survey further showed that in 2000, the implied cost of remittance ranged from 1.50 percent to 4.25 percent of transaction. This year, the cost is lower from 1.50 percent to three percent. "Except for the advice and pay mode, all types of remittance services has shown a declining range of cost from 2000 to 2005. Remittance from London to Manila also showed declines, from $7.48 to $26.38 in 2000, charges have declined to a range of $1.83 to $20.15 per transaction. The scenario is different in Hong Kong since remittance cost to Manila has increase from $1.91 to $5.77 in 2000 to $2.31 to $5.78 by 2005. The average fund transfer transaction is $200. "The rates of charges for door-to-door and advice and pay types of remittance service stayed the same for 2000 and 2005," the survey said. However it was noted that for the credit to other local bank arrangement, the upper end of the cost per transaction declined from 2.57 percent in 2000 to 2.25 percent this year. According to Tetangco, the banking sector realize that the remittance business is a major source of income and banks are now intensifying their efforts to deliver enhanced and more efficient money transfer services. For instance banks have been increasing the number of remittance centers abroad and forging alliances with foreign financial institutions. "Banks now provide door-to-door services and offer deposit accounts for remittance recipients with incentives such as low maintaining balance, low service charge or free insurance," said Tetangco. More recently, he said some banks have also participated in providing electronic money transfer services through mobile phones. |
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