How digital banks reshape the Philippine financial landscape

EMBRACING digital banking was a leap the Bangko Sentral ng Pilipinas (BSP) took since it began opening its doors to the idea of fully digital banks to operate in the country alongside traditional banks.

- By Abigail Marie P. Yraola Deputy Research Head

In December 2020, the BSP released guidelines on the establishment of digital banking licenses and by 2021, it approved six digital banks: Overseas Filipino Bank, Tonik Digital Bank, Inc., UNO Digital Bank, GoTyme Bank, Maya Bank, Inc., and UnionDigital Bank, Inc.

Shortly after, it then imposed a three-year pause in granting licenses for the central bank to monitor the banks' performances.

The central bank believes that these banks are key drivers for financial inclusion and will contribute innovative financial solution.

Fast forward, these frontrunners will now face competition as the BSP allow four more banks to operate, meaning, a total of 10 banks will hold digital licenses, wherein the four will probably be fully operational by next year.

Issued on Dec. 26 last year, the BSP Circular No. 1205 approved the issuance of digital banking licenses, including the conversion of existing bank's license to digital bank license beginning Jan. 1, but still subject to prudential limits and conditions.

"This move further advances BSP's agenda on greater financial inclusion and digital transformation by encouraging the entry of new players with robust, distinctive customer value propositions and innovative business models," the BSP said in an e-mail.

This proves the central bank's significant efforts and initiatives to support the growth of digital banking.

Additionally, it shows that digital banks are positioned for growth and reshape the financial landscape in the country, however, it would raise a concern on how these banks will leverage its potential while managing risks and establishing fair competition in the banking industry.

DIGITAL BANKS VS. TRADITIONAL BANKS