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 Banks charge too much for overseas money transfers

Modern-day banking started on the sidewalks of medieval Milan, Italy. Money was actually traded from benches, hence “banco,” or bank. At that time, bankers were considered only a head above murderers, robbers and thieves.Today, bankers have become respectable. But there are pockets of sheer greed.

When I was in Los Angeles recently, I had to send $500 to my son in Makati City. Philippine National Bank has a subsidiary that handles money transfers. I was charged a fee of three percent, or $15.

 

In the olden days before the invention of the telegraph, a three percent charge would be reasonable. The money, or the letter of credit, was actually loaded onto a sailing ship. The voyage across the Pacific, with stopovers in Honolulu, Tokyo and Hong Kong, took as long as three months.

Today and every hour of every day, billions upon billions of dollars are electronically transported in split-seconds across cyberspace.

 

In this day and age, a three percent transmission charge is atrociously high. I actually felt I was held up.

To make matters worse, Bank of the Philippine Islands, the receiving bank in Makati, took its own greedy cut of $10.55, which is 2.11 percent.

From end to end, the transaction, lasting only a few days, cost me $25.55 in all, or 5.11 percent. Doesn’t the whole thing smell like the usurious “five-six” (you borrow P5 and pay back P6 in one week’s time) operation in the public market?

 

Also, on the lame excuse that the incoming e-mail letter could not be found (or, sometimes, the bank teller will say the computer is “off-line”), the bank held the money hostage for one week before releasing it.

But more likely, the bank was playing the game I call Weekend Money. Under Philippine central bank rules, a bank has to have a certain cash reserve at the close of banking hours every Friday. If a bank’s reserve is short, it will borrow, if only over the weekend, from another bank.

 

Because of the high transmission charges at both ends of the transaction, and the delay in the release of the money at the receiving end, the ever resourceful Filipinos abroad find other ways of sending money to their loved ones.

Every returning Filipino always has a few hundred dollars (the “padala”) in his pocket for “pasalubong” [arrival tokens]. When I returned from my trip, I brought several hundred dollars, which my sister was sending over to our grandnephews and grandnieces.

 

I hear the central bank estimates these unofficial money transfers at one-and-a-half times the official remittance level. If remittances through official channels reach $12 billion a year, then the remittances through unofficial channels reach a whopping $18 billion a year.

In their greed, the banks do not see the huge market that they can tap. If the transmission fee is brought down to one-half percent, or even lower, then they will capture most, if not all, of the $18 billion that is now being sent through unofficial channels. Then, the banks will really be raking it in.

But, I doubt whether the banks will ever do it. Greed has a way of turning a banker’s logic topsy-turvy.

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