BSP will license another four digital banks

By means of Luisa Maria Jacinta C. Jocson, Reporter

THE BANGKO SENTRAL ng Pilipinas (BSP) will allow four more digital ones banks will operate in the country from next year, it said on Thursday.

“The Monetary Council has approved the lifting of the moratorium on the granting of new digital banking licenses from January 1, 2025 and has allowed up to ten digital banks to operate in the country,” the report said in a statement.

The four additional licenses can come from new applicants or from banks that want to convert their existing license to a digital license.

“This limit will allow the BSP to closely monitor developments in the digital banking sector, gain a broader perspective as these banks mature in their operations, and assess the impact of the entry of new players on the banking system,” BSP Governor said. Eli M. Remolona, ​​Jr. said.

In 2021, the central bank has limited the number of digital banks to 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 by Voyager Innovations, Inc.; Overseas Filipino Bank, a subsidiary of Land Bank of the Philippines; UNObank from DigibankASIA Pte. Ltd.; and UnionDigital Bank or Union Bank of the Philippines, Inc. (Union Bank).

Mr Remolona said applicants should “bring something new to the table.”

“We want to see a unique product and service offering that is different from that of the existing market players. This offering should have significant potential to reach a broader customer base, especially the untapped or underserved market segments.”

The BSP said applicants will undergo a “rigorous” licensing process that will evaluate their value proposition, business models and resource capabilities.

Applicants must also meet standard licensing criteria, including transparency about ownership and control structures; the composition of shareholders, directors and senior management; including capital adequacy and corporate governance and risk management.

“Only digital banking applicants that have demonstrated the ability to meet the minimum criteria and offer a unique value proposition, or develop new and innovative business models not currently offered or used by existing players, will become a digital banking license granted.”

“Applicants must also demonstrate sufficient capabilities and willingness to deploy their digital solutions and grow their businesses sustainably within the Philippine environment,” the BSP added.

Mr Remolona also said the decision to lift the moratorium was based on his assessment of the functioning of current digital banks.

“The BSP took into account the financial soundness of the digital banks and the achievement of the policy objectives of the Digital Banking Framework, namely to promote wider adoption and use of digital financial services in the country and expand their reach to the non- -served and underserved segments of society.”

MORE COMPETITION
Meanwhile, Bankers Association of the Philippines (BAP) President and Bank of the Philippine Islands (BPI) President and CEO Jose Teodoro K. Limcaoco said more digital banks would help support financial inclusion in the country.

“It is always welcome when the BSP opens up the sector as it promotes competition and financial inclusion,” he told reporters late last week.

Ronald B. Gustilo, national campaigner for Digital Pinoys, said digital banks “help ease the typically time-consuming procedure of physically visiting a bank to open an account.”

“It will provide Filipinos with the opportunity to open an account easily and at the most convenient time,” he said in a Viber message.

However, analysts noted that digital banks still face a number of challenges, especially in achieving profitability.

“The lack of a physical presence could hamper their search for assets. And if you look at today’s digital banks, I think some of them are still not profitable,” said Mr Limcaoco.

Earlier this year, the BSP said only two of its six current digital banks were profitable.

The latest BSP data also showed that digital banks’ assets reached $105 billion in May. This represented only 0.33% of the total resources of the Philippine financial system during the period.

“Digital banking is a difficult thing because they have to compete with the traditional banks, which I have always said have all the advantages because we can also be digital,” said Mr Limcaoco.

Angelito M. Villanueva, founder and vice president of FinTech Alliance Philippines and head of innovation and inclusion of Rizal Commercial Banking Corp., said digital banks must compete with larger and more established players.

“Despite significant growth potential, these challenges mean that most digital banks in the country are not yet transforming the financial sector at the expected speed or scale they envisioned when their licenses were initially issued,” he added.

Meanwhile, Mr Gustilo said the BSP must ensure that digital banks can meet customer needs 24/7 even if they do not have a physical branch.

There must 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 must ensure that the ease of opening accounts will not result in fictitious account names that can be used for illegal transactions,” Mr Gustilo added.

The BSP aims to involve at least 70% of adult Filipinos in formal education Ffinancial system.