Burdening depositors

Banks are lobbying to be allowed to increase the charges or fees they impose on transactions via automated teller machines or ATMs. As expected, consumer groups and some legislators have raised a howl of protest at the move.

It is not hard to understand why ordinary depositors are against it. What is difficult to understand is why banks — among the most profitable sectors of the economy — want their customers to finance the cost of improving services using the ATM network.

This is how banks, through their group the Bankers Association of the Philippines (BAP), justify their request to impose higher fees on ATM transactions. The cap on fees that banks could charge on cash machine transactions imposed in 2013 — and lifted earlier this year by regulators — has led to the country falling behind its regional peers in terms of the number of ATMs deployed, it said.

It added that local ATM density in the Philippines stood at only half compared to other Association of Southeast Asian Nations (Asean) countries. The culprit for that? The moratorium on ATM transaction fees since 2013, which has supposedly held back the banks’ optimal performance in servicing and expanding their reach.

“The number of cardholders has been increasing for the past six years,” BAP managing director Benjamin Castillo said in a statement. “Banks need to keep up with the maintenance and innovation of ATMs, as well as expansion of ATM network to accommodate the surge of ATM usage.”

The BAP estimated that only 21,000 ATMs service 58 million cardholders nationwide — equivalent to about 20 ATMs for every 100,000 cardholders. Meanwhile, Thailand has 94, Singapore has 49, Malaysia has 45 and Indonesia has 40 ATMs for every 100,000 cardholders. The BAP, however, didn’t say how much those countries charge for their ATM usage.

The group added that the annual growth rate in ATM deployments averaged 13 percent prior to 2013, but since then has declined to 6.4 percent, while ATM transaction volume has continued to increase from 2014 up to the present.

Aside from the physical ATM deployments, it said there were other expenses that banks incur from operational activities such as loading, servicing, complaints handling, reconciliation, software, capacity expansion and security.

While it is true that expanding the ATM network and servicing it entails cost, these expenses are for the good of the customers that banks are supposed to invest in and nurture. More to the point, don’t banks make money by using the deposits of these ATM users for lending to their corporate clients, even as users of ATM machines, on the other hand — ordinary employees are the majority — hardly earn interest on their deposits?

Besides, haven’t the banks also saved much from the reduction in physical workforce and the man-hours required for over-the-counter transactions, and from other efficiencies brought about by ATM networks?

Now, let’s see how much banks earn as an industry. The net profits of Philippine banks surged 26.4 percent in the first half of 2019 to P109.77 billion from P86.87 billion a year ago due to higher interest and noninterest earnings, according to data from the Bangko Sentral ng Pilipinas. In 2018, earnings of Philippine banks climbed by 6.4 percent to P178.83 billion from P168 billion in 2017 on the back of higher trading gains and interest income.

Economist Cielito Habito also highlighted these figures in an earlier Inquirer column: “In the 15-year period 2004-2018, overall GDP growth averaged an annual rate of 5.8 percent, but financial intermediation (primarily banking and insurance) grew at an average annual rate of 8.7 percent. In the first half of this year, the overall economy grew by a disappointing 5.5 percent, after maintaining 6-7 percent growth over the last eight years. But guess what: The financial sector grew nearly twice as fast, by 9.7 percent. Recently, the country’s top banks have also announced growth in profits ranging from 17-46.8 percent. Interestingly, when our economy nearly ground to a halt at 0.9 percent GDP growth in 2009, financial intermediation actually grew a hefty 7.1 percent.”

BAP has tried to assuage the public’s anger with platitudes.

“We would like to assure the banking public of our commitment to serving them,” it said.

If banks are halfway sincere in that commitment, they should channel part of their prodigious profits to expanding and improving their ATM services — without passing on the cost to their depositors.