Phl money shops trade 4 currencies, plus GCs

By Jerry Maglunog

Local money changers mostly accept only four currencies and gift certificates (GCs) of a popular mall chain because these are the notes that have several users.

The Bangko Sentral ng Pilipinas (BSP) said the foreign-exchange shops do not violate any provision in their license in the purchase of popular gift checks.

The four currencies commonly accepted are the United States dollar, the euro of the 28-member European Union, the yen of Japan, and the pound sterling of the United Kingdom. Simply, the dollar, euro, yen and pound are the four most traded currencies in the world.

The four currencies are also the units of special drawing rights (SDR) at the International Monetary Fund. It is unknown, however, if the yuan’s acceptance in most money changers will also shoot up when the Chinese currency becomes the fifth unit of SDR.

The BSP has a simple explanation on why these four currencies are the most welcome in many, if not all, money changers in the Philippines: so many users and the market is so big, being the four most traded and used currencies in the world.

But what if money changers concentrate more on buying GCs and traveler’s checks, instead of increasing the currencies they are buying? For the BSP, there is no problem in this scenario, since buying anything of value is an allowed business.

The central bank calls this endeavor as “hidden business,” as buying GCs and travelers’ checks at cheaper face value is not illegal, but the practice is also unregulated, so the public has to decide whether to avail itself of these services.

Anyone in Libertad St. in Pasay City can prove to himself that the BSP-labeled hidden business is no longer hidden literally, because it’s an open business that anybody can avail of unless unwilling to take a huge cut in the face value of the GCs.

The BSP gave this official statement as more and more money changers in Libertad, Gil Puyat Avenue and Edsa, especially small ones that look like fly-by-night, are caught involved in this trading.

BSP Deputy Governor for the Supervision and Examination Sector Nestor Espenilla Jr. described this business of some money changers as “not illegal and not regulated,” meaning it is up to the public whether they will avail themselves of such service.

“These are all private decisions between two consenting parties that affect no one else. Not illegal per se and not regulated,” Espenilla explained.

Buying of GCs by these entities are so massive that sometimes a seller sells P10,000 worth of Sodexo GCs. One money changer in Libertad buys a P1,000 GC for only P880, for a P120 spread in favor of the buyer, while a P100 costs P88.

GCs are common during Christmas and other occasions, as these are good as cash and more and more entities accept them as payment. Only SM-owned Sodexo, Robinson’s and Puregold GCs are bought because of their wide acceptance in the secondary market.

Rustan’s GCs are not bought because of the expensive products at the department store. Espenilla admitted that since this practice is unregulated, it is difficult to trace where the GCs are brought by the money changers.

“As a matter of principle, not every financial transaction has to be regulated,” the deputy governor explained further. Espenilla, the youngest among the three deputy governors of the central bank, is also the regulator of banks, pawnshops and remittance centers.

Prior to the creation of Philippine Payments and Settlement Systems, money couriers were also regulated and supervised by the BSP. According to the deputy governor, it is doubtful if regulation will work in this activity.

“Regulation should only be considered if there’s public interest involved and only if it can be effectively enforced,” the official said.

If GCs have huge cut when sold to money changers, the ordeal of anyone selling a travelers’ check is worse. One changer in Mabini St. in Manila was told to be buying a 300 euro for just over P12,000.

This amount means the check is given a discount of almost P1,000 for every 100 euro (P4,940). According to Wikipedia, the massive credit use has dampened the popularity of traveler’s checks.

“Their use has been in decline since the 1990s as alternatives, such as credit cards, debit cards and automated teller machines, became more widely available and were easier and more convenient for travelers.

Traveler’s checks are no longer widely accepted and cannot easily be cashed, even at the banks that issue the checks.