By Luisa Maria Jacinta C. Jocson, Reporter
THE BANGKO SENTRAL ng Pilipinas (BSP) will allow four more digital banks to operate in the country starting next year, it said on Thursday.
“The Monetary Board has approved the lifting of the moratorium on the grant of new digital banking licenses starting on Jan. 1, 2025 and allowed a maximum of 10 digital banks to operate in the country,” it said in a statement.
The four additional licenses may come from either new applicants or banks seeking to convert their existing license to a digital one.
“With this limit, the BSP can closely monitor developments in the digital banking industry, obtain a broader perspective as these banks mature further in their operations, as well as assess the impact of the entry of new players on the banking system,” BSP Governor Eli M. Remolona, Jr. said.
In 2021, the central bank capped the number of digital banks at six.
The six online lenders operating in the country are Tonik Digital Bank, Inc.; GoTyme Bank of the Gokongwei group and Singapore-based Tyme; Maya Bank of Voyager Innovations, Inc.; Overseas Filipino Bank, a subsidiary of Land Bank of the Philippines; UNObank of DigibankASIA Pte. Ltd.; and UnionDigital Bank of Union Bank of the Philippines, Inc. (UnionBank).
Mr. Remolona said that applicants must “bring something new to the table.”
“We want to see unique product and service offerings that are different from that offered by the existing market players. These offerings should have significant potential to reach broader clientele, particularly the untapped or underserved market segments.”
The BSP said that the applicants will undergo a “rigorous” licensing process which will evaluate their value proposition, business models and resource capabilities.
Applicants must also be compliant with the standard licensing criteria, which covers transparency on ownership and control structures; the composition of shareholders, directors, and senior management; capital adequacy and corporate governance and risk management, among others.
“Only digital bank applicants that have demonstrated capacity to meet the minimum criteria and offer unique value proposition, or develop new and innovative business models that are currently not offered or accessed by existing players, will be granted a digital banking license.”
“Applicants must also display sufficient capabilities and readiness to deploy their digital solutions and to sustainably grow their business within the Philippine setting,” the BSP added.
Mr. Remolona also said that the decision to lift the moratorium was based on its assessment of the operation of the current digital banks.
“The BSP took into consideration the digital banks’ financial soundness and achievement of the policy objectives of the Digital Banking Framework of promoting wider adoption and use of digital financial services in the country and expanding their reach into the unserved and underserved segments of society.”
MORE COMPETITION
Meanwhile, Bankers Association of the Philippines (BAP) President and Bank of the Philippine Islands (BPI) President and Chief Executive Officer Jose Teodoro K. Limcaoco said that more digital banks would help support financial inclusion in the country.
“It’s always welcome when the BSP opens the sector because it promotes competition, it promotes financial inclusion,” he told reporters late last week.
Ronald B. Gustilo, national campaigner for Digital Pinoys, said that digital banks help “ease the usually time-consuming procedure of physically visiting a bank to open an account.”
“It will provide an opportunity for Filipinos to open an account with ease, at their most convenient time,” he said in a Viber message.
However, analysts noted that digital banks still face some challenges, particularly in achieving profitability.
“The lack of a physical presence, I think, could hinder them in looking for assets. And when you look at the current digital banks today, I think some of them continue to be unprofitable,” Mr. Limcaoco said.
Earlier this year, the BSP said that only two out of the six current digital banks were profitable.
The latest BSP data also showed that resources held by digital banks stood at P105 billion as of May. This accounted for just 0.33% of the P31.787-trillion total resources of the Philippine financial system during the period.
“Digital banking is a hard business because they have to compete with the traditional banks, who I’ve always said have all the advantages because we can be digital as well,” Mr. Limcaoco said.
Angelito M. Villanueva, FinTech Alliance Philippines founding chairman and executive vice-president and chief innovation and inclusion officer of Rizal Commercial Banking Corp., said that digital banks must compete with larger and more established players.
“Despite the considerable potential for growth, these challenges mean that most digital banks in the country are not yet transforming the financial industry at the anticipated speed or scale envisioned when their licenses were initially issued,” he added.
Meanwhile, Mr. Gustilo said that the BSP must ensure that digital banks will be able to cater to clients’ needs 24/7 despite not having a physical branch.
There should also be strict implementation of the recently signed Anti-Financial Account Scamming Act (AFASA).
“Opening bank accounts with digital banks is easier compared to opening accounts in person. Digital banks should ensure that the ease of opening accounts will not result in fictitious account names which may be used for illegal transactions,” Mr. Gustilo added.
The BSP wants to onboard at least 70% of adult Filipinos into the formal financial system.