BancNet, MegaLink merger marks ‘new beginning’ in e-payments

MANILA, Philippines - The merger of BancNet and MegaLink last week has transformed the automated teller machine (ATM) switching operations to one entity (Bancnet), but Bangko Sentral ng Pilipinas (BSP) Gov. Amando Tetangco Jr. called the event  “the beginning.”

In 2008, ExpresNet outsourced its operations to BancNet to concentrate on its core banking operations.

During the formal merger signing ceremonies last Friday, Tetangco said that a single network is the important first step toward an efficient and inclusive retail payment system.

“Our next step is to collaborate on how to best implement not only the merger of ATM and POS (point of sales) operations, but the overall integration of our payments system,” he said.

The country’s banking system presently operate more than 16,000 ATMs nationwide from just 6,200 units in 2005.

“You (banks) have expanded the use of the ATMs beyond deposit withdrawals, to bills payment, to making donations and even to selling e-loads to pre-paid cellphone users,” he said.

The Philippines average P2.5- billion payments per month, equivalent to over P3.2 trillion.

But 99 percent are cash-based.

Tetangco said that it is an expensive way of transactions as the cost of production, transporting, protecting and even retiring cash is quite high.

This high cost poses a barrier to the financial inclusion of majority of the country’s population.

“A cross country study found that a 10-percent increase in the share of electronic payments was correlated with a 0.5-percent increase in consumer spending.  This efficiency will also drive business innovation and promote greater transparency in transactions,” the BSP governor added.

In the mid-term, Tetangco said that there were still challenges facing the transformation into a single entity.

These include: setting well-defined rules, policies and processes for cooperation and areas of competition; upgrading current arrangements to enable the participation of payment service providers, including non-banks; and, that the retail payment system should provide each of its users with transparency, certainty and reliability.

BancNet chairman Manuel C. Tagaza said that the full integration should be realized in September this year.

Tagaza said that there are still technical, financial and governance issued that have to be ironed out.

He, however, cautioned the public that it would not necessarily mean lower transaction costs.

“That has to be reviewed, after all, it is not only ATM switch operations. There are costs issues to the bank that owns the ATM, and cost related to the bank that issues the card,” Tagaza, who is also senior vice president of the Bank of the Philippine Islands (BPI), pointed out.

He, however, assured that transparency and accountability will be at the top of their minds.

The country’s first ATM switch operator was ExpressNet, which was formed by BPI in 1983.

Then in 2006, the three ATM operators interconnected, meaning an ATM card could be transacted in any ATM regardless of bank affiliation.