Amex to outsource its data processing requirements

The Bangko Sentral ng Pilipinas (BSP) has allowed American Express Savings Bank to outsource its data processing requirements to IBM and Electronic Data Systems.

According to BSP Deputy Governor Alberto Reyes, the MB approved Amex Bank’s request to be allowed to outsource its data processing operations as the bank goes full swing into its retail operations in the Philippines.

Amex Bank was allowed to operate in the Philippines after it acquired Omni Savings Bank Corp. and its 11 branches in 2001. Omni Savings was owned by the Manila Banking Corp. and the entry of Amex paved the way for its recapitalization. Amex plans to expand the bank’s operation into consumer banking.

Reyes said Amex needs the services of IBM and EDS in its consumer banking operations which would require setting up a client database for its consumer products.

Amex is only one of a number of foreign banks targeting the country’s consumer market as credit cards became more and more popular among middle class consumers.

The BSP, however, is tightening on credit card companies, alarmed by the rise in past-due receivables.

Reyes said credit card issuers have yet to submit their own proposals for the aging of credit card loans and receivables as it revises the aging structure of credit card loans to conform with international practice.

Reyes told reporters that before making its policy decision, the central bank wanted the industry to draw up its own proposals on how the adjustments should be made.

The BSP had expressed particular concern over the installment plans offered by credit card companies that allowed holders to amortize their credit card loans over a long period

According to Reyes, this had given a new dimension to the aging of credit card loans since they could not be considered overdue or past due if they were being serviced over a long period.

Reyes said the adjustment would bring the local practice up to par with international standards that have been tailor-made specifically for credit cards.

According to Reyes, the country’s aging structure for credit card receivables were based on the structure applied on regular loan accounts of banks. "We patterned it to installment receivables," he said.

The changes, Reyes pointed out, would only acknowledge the differences between the two and incorporate the peculiarities of credit card loans.

"We have to determine the generally acceptable reckoning for past due receivables and definitely, there will be an aging formula," Reyes said. "This will help clean up the receivables of the industry."

Based on generally accepted international practices, Reyes said credit card receivables that have not been collected beyond 180 days were written off immediately. – Des Ferriols