New, incumbent players keen on securing BSP’s 4 new digital bank licenses

Several players have already signified interest in securing the four additional license to operate as digital banks in the Philippines, ahead of the official lifting of the moratorium that limited license grants to six.

According to Bangko Sentral ng Pilipinas (BSP) Technology Risk and Innovation Supervision Department director Melchor Plabasan, a mix of new players and incumbent banks looking to convert their license into digital banks are seeking to secure the four spots.

“There are new players that are exploring and are interested to enter the Philippine market, but based on our issuance, we will only start accepting new applicants by January 1, 2025,” he told reporters on the sidelines of the BSP-IMF Systemic Risk Dialogue.

“We’re busy right now determining which among the digicentric institutions that we have can already be considered as operating like a digital bank so we can also transition their license from, let’s say, rural bank or thrift bank to digital bank,” he added.

The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) in August approved to increase the limit of digital bank license grants to 10 from six currently. The lifting of the moratorium is set to take place on the first day of 2025.

Plabasan said the institutions have already sent queries about certain legal and regulatory requirements on the matter, but the central bank will only start accepting applications when the moratorium is lifted.

Digital banks are defined as banks that offer financial products and services that are processed end-to-end through a digital platform and/or electronic channels with no physical branches.

To qualify, banks must meet the minimum capitalization of P1 billion, and will have to follow all the fiduciary rules imposed on other bank categories.

“If you’re already behaving like a digital bank, you should be regulated like a digital bank, not a rural bank. That’s why the intention really is to minimize the arbitrage,” Plabasan said.

“There are existing players who would like their license be converted to digital bank, and there are also foreign players that have signified interest to enter the Philippine market,” he added.

Assuming that the new players complete the necessary requirements, they are expected to secure the digital bank license and start operations within 2025.

For his part, BSP governor Eli Remolona Jr. said opening up four more license grants would allow for the sector to see other business models as some of the incumbents are struggling in their loan offerings.

“We think we could use other business models in terms of digital banks, so now we’ve added four licenses to potential digital banks. We’re now in the process of screening,” he said.

“There’s a lot of applications for those licenses so we’re looking at the candidates and which ones have more promising business models, especially in terms of making loans, so that’s where we are,” he added.

The six banks that have already secured the digital bank licenses are GOTyme, Maya Bank, Overseas Filipino Bank (OFBank), Tonik Bank of Singapore, UNObank of Singapore, and UnionDigital of the Union Bank of the Philippines.?

"We've been monitoring the digital banks. We have, as you know, six licenses for digital banks. Not all of them are doing well. What they seem to be good at is collecting deposits online," Remolona said.

"Most of them are struggling with making loans online, making the right loans online," he added.—AOL, GMA Integrated News