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May 27, 2024

Deposit price competition seen intensifying with entry of digital banks

Deposit price competition is seen to intensify with the entry of digital banks in the Philippines, giving conventional and existing banks a run for their money.

In a webinar, S&P Global Ratings primary analyst Nikita Anand said existing industry players face greater and intensified competition as more digital banks start commercial operations this year.

“Many of them are planning to launch operations by mid of this year and this could trigger deposit price competition. Many of these digital banks where we’ve seen when they launch operations, they have a very high deposit rates to attract funds,” Anand said.

It would be recalled the Bangko Sentral ng Pilipinas (BSP) has so far awarded digital banking licenses to six entities. However, it imposed a three-year moratorium on the grant of new digital banking licenses to allow for the close monitoring of the performance of proponents under the new banking classification.

Thus far, Overseas Filipino (OF) Bank of state-run Land Bank of the Philippines and Tonik Digital Bank started commercial operations last year.

On the other hand, UNObank, Union Digital Bank of the Aboitiz-led Union Bank of the Philippines, GOtyme – a joint venture between the Gokongwei Group and Singapore-based digital bank Tyme, and Maya Bank of PLDT’s Voyager Innovations and PayMaya Philippines are scheduled to launch their operations this year.

Due to lower investments in the absence of brick and mortar branches, Anand said digital banks are able to offer five to six percent deposit rates for clients, higher than what conventional banks are offering.

“There’s a huge market out there to capture as Philippines is a very under penetrated market in the sense especially when it comes to retail loans or small ticket loans,” Anand added.