Instant payment startup to provide below P1 transaction fees

Talino Venture Studios and Chemonics International have invested up to $5 million in the instant payment system Higala, which seeks to connect initially with Philippine rural and thrift banks and lower transaction fees to below P1, before moving on to the big banks.

Launched officially on Thursday, April 25, Higala — which means “good friend” or “trusted friend” in the Bisaya language — seeks to tap local financial institutions that are currently not connected with InstaPay.

Higala explained that out of some 400 rural banks in the country, only 18 are part of InstaPay. The platform is looking to onboard 15 rural banks, five thrift banks, and 100 financial institutions by the end of 2024.

“There’s a lot to be done. There are still about 2.8 billion transactions per month in the Philippine GDP (gross domestic product) that remains to be transacted using cash, and we still have 44% of Filipino adults that don’t have access to formal bank accounts or transaction accounts,” said Higala President and Chief Executive Officer Vice Catudio.

According to Catudio, Higala could bring down transaction fees to around P1 or less which would be among the “cheapest” in the world.

“We’re going to address the issue of on-ramp cost, which is prohibitive for most financial institutions like rural banks, to participate in interoperable payment systems,” he said during Higala’s launch in Makati City.

“So we’ll bring down the cost of participating in payment systems. Second, we’ll bring down the switching fee,” he added.

At present InstaPay transaction fees cost up to P25 which includes the P3 switching fee, and additional fees charged by financial institutions as part of the on-ramp costs, as they spend millions in technology and infrastructure to connect to payment highways.

“Itong mga bank (these banks), they have to spend a lot of money to connect to InstaPay. Under P1 is our goal and we’re going to hit it. In addition to the under P1, on-ramp is like near zero so that everyone can participate,” Talino Chief Executive Officer Winston Damarillo said.

“We will lower their cost. it’s up to them how to charge their customers. We might be able to give them a way to pinpoint who are the important customers.” 

Last year, former Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said the central bank was looking at ways to remove fees on small-value fund transfers to incentivize more Filipinos to use digital payments.

Damarillo said the platform is set to be interoperable in a month or two, with a target to hit transaction volumes equivalent to 10% of InstaPay’s transactions, which reached 99.413 million or P540.1 billion as of March 2024, based on the latest data from the BSP.

He also said Higala will be embedded on platforms of financial institutions, which will then choose the “cheapest path,” and serve as an “invisible” option to InstaPay and PESONet.

The platform is set to cater to an initial four rural banks, but Higala said it is already in talks to onboard more institutions in the future, including universal and commercial banks.

“It’s a matter of time. I think all banks benefit with a much more robust payment infrastructure. I think it’d be nice if we all have bank accounts instead of wallets right, it’d be nicer if you represent money as a QR code,” Damarillo said. — DVM, GMA Integrated News