Banks seen to gobble up 90% of remittance business

Banks are expected to account for up to 90 percent of the entire remittance business as overseas Filipino workers shifted away from informal channels and instead send money home through the banking system.

Banking industry leaders said that intense competition between banks has led to innovations that make it more attractive, convenient and safer for overseas workers to send money through banks.

The Bangko Sentral ng Pilipinas (BSP) reported that only about 15percent of all OFW remittances are sent through couriers, door-to-door delivery services and other informal channels, down significantly from 20 percent last year.

Banks now account for 85 percent of total inflows as aggressive competition and economies of scale edged out informal remittance channels.

But the Bank of the Philippine Island (BPI) said this was not the limit of the country’s banking system, especially after rural banks, thrift banks and even cooperative banks in the rural areas have banded together to form another network catering specifically to isolated areas of the country.

BPI president Aurelio Montinola III told reporters that competition had compelled banks to take on the remittance business with more creativity and intensity to attract OFWs away from the informal sector.

"Right now, I guess the next target is 90 percent of total remittances," Montinola said.

According to Montinola, the establishment of the Nationlink network of rural banks could close the gap even further.

Nationlink is the country’s fourth network of automated teller machines (ATMs) after Megalink, Bancnet and Expressnet. It linked up to a hundred ATMs of rural banks, thrift banks, cooperatives, and NGOs nationwide.

Montinola said that once fully operational, informal remittance channels would no longer be necessary except in isolated instances.

"There will always be padala and such, but the bulk of it would go through the banking system," he said.

The Asian Development Bank (ADB) reported earlier that remittance costs were high in the Asian region and this had discouraged expatriate workers from utilizing their network because the cost eats into their remittance.

According to Montinola, however, the numbers were much better in the Philippines where remittance costs were estimated at two to five percent. The regional average was placed at four to five percent.