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July 14, 2024

BSP plans to expand digital bank licenses soon

The Bangko Sentral ng Pilipinas (BSP) is considering reopening the application window for digital bank licenses earlier than scheduled, as it assesses the need to expand the digital bank market in the Philippines.

BSP Governor Eli M. Remolona announced during a recent foreign investors’ briefing that the central bank aims to allow more digital banks in the near future.

The BSP had closed the application window for digital bank licenses for three years, starting from September 2021 until the fourth quarter of 2024, with only six digital banks granted licenses as of August 31, 2021.

The establishment of a digital bank requires a minimum capitalization of P1 billion.

Digital banks fall under the BSP’s seventh bank category and are expected to have minimal or no reliance on physical touchpoints, while still maintaining at least one office in the Philippines for customer complaints and inquiries.

The BSP’s move to limit the number of digital banks is intended to closely monitor their performance and impact on the banking system and their contribution to financial inclusion efforts.

The six existing digital banks in operation include government-owned Overseas Filipino Bank Inc. of Land Bank of the Philippines; Tonik Digital Bank of Tonik Financial Pte Ltd. of Singapore; MAYA Bank of the PLDT Group; UNObank Inc. of Singapore; UnionDigital Bank of Aboitiz-led Union Bank of the Philippines; and GoTyme Bank Corp. of the Gokongwei Group’s Robinsons Bank.

The BSP recently implemented regulatory changes in September 2022 regarding prudential requirements, licensing, and documentation for digital banks.

Circular No. 1154, which was approved by the Monetary Board, allows the central bank to consider applications to establish thrift, rural, and cooperative banks with digital bank business models as digital bank license applicants.

These banks, offering financial products and services processed through a digital platform or electronic channels under an Advanced Electronic Payments and Financial Services (EPFS) license, are required to have a minimum capital of P1 billion to obtain a digital bank license.

Existing thrift banks, rural banks, and cooperative banks with similar digital platforms under EPFS licenses will be given five years to meet the new minimum capital requirement for a digital bank license.

It is important to note that the amended circular does not imply new digital bank licenses will be granted at this time; the application window for new digital bank licenses remains closed.

The BSP’s focus on digital banks aims to promote financial inclusion and keep pace with technological advancements in the banking sector.

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