The Monetary Board has approved the lifting of the moratorium on the grant of new digital banking licences starting 01 January 2025 and allowed a maximum of 10 digital banks to operate in the country.

The grant of new digital bank licences, which include the conversion of an existing bank’s licence to a digital bank licence, aims to continuously harness the potential of these banks in bringing positive impact to the Philippine financial system while remaining sensitive to their attendant risks.

Eli M. Remolona, Jr., Bangko Sentral ng Pilipinas (BSP) governor said: “With this limit, the BSP can closely monitor developments in the digital banking industry, obtain 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.” Since the issuance of the Digital Banking Framework in December 2020, six digital banks have been operating in the Philippines. With this current complement, the lifting of the moratorium will accommodate four additional licensees, coming from either new or converting banks.

In opening the application window, new digital bank applicants will be subjected to a rigorous licensing process that will look into their value proposition, business models, and resource capabilities. This is in addition to compliance with the standard licensing criteria which encompasses the assessment of the transparency of banks’ ownership and control structure, suitability of shareholders, fitness and propriety of directors and senior management, adequacy of capital, as well as banks’ strategic and operating plan, including an appropriate system of corporate governance and risk management. Only digital bank applicants that have demonstrated capacity to meet the minimum criteria and offer unique value propositions, 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 sustainably grow their business within the Philippine setting.

“Applicants must bring something new to the table. We want to see unique product and service offerings that are different from those 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 governor said.

“We have based our decision on our assessment of the operations of digital banks,” the governor added, noting that 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.

Earlier, the BSP capped the number of digital bank licences to six and temporarily closed the application window effective 31 August 2021, to enable the BSP to monitor the performance and impact of digital banks on the banking sector as well as evaluate their contribution to the BSP’s digital transformation and financial inclusion goals/agenda.

Ultimately, the decision to allow new digital banks to operate in the country is in line with the BSP’s mandate of ensuring financial system stability complemented by greater financial inclusion and digital transformation.

Re-disseminated by The Asian Banker