Philippines to issue up to four more digital bank licences

The Central Bank of the Philippines (BSP) has said from next year that it will allow another four digital banks to operate in the country, thereby raising the cap on the number of digital banking licences to 10.

The central bank said in a statement on August 8 that its monetary board had decided to lift the moratorium on new licences from January 1, 2025.

The BSP said the decision was aimed at harnessing the potential for banks to have a positive impact on the Philippines’ financial system. It added it would remain sensitive to the risks arising from the establishment of the new institutions.

The BSP said it would issue the new licences either to a new bank or to an existing one that applied to convert its current licence into a digital banking licence.

The central bank’s governor, Eli Remolona, said the applicants “must bring something new to the table”.

“We want to see unique product and service offerings that are different from that offered by the existing market players,” he said.

“These offerings should have significant potential to reach a broader clientele, particularly the untapped or underserved market segments.”

The BSP issued its first digital banking licences in December 2020. In August 2021, it decided to stop issuing new licences and keep the number of digital banks in the Philippines at six: GoTyme Bank, Maya Bank, Overseas Filipino Bank, Tonik Digital Bank, UnionDigital Bank and UNO Digital Bank. The central bank said it was imposing the moratorium to monitor the banks’ performance and their impact on the wider banking sector, and to evaluate how well they could promote digital transformation and financial inclusion.

In reviewing future applications for digital licences, the BSP said it would look into each applicant’s value proposition, business model and resource capabilities. It also plans to assess a range of factors, including: the applicant’s ownership and control structure; the suitability of its shareholders; the fitness and propriety of its directors and senior management; the adequacy of its capital; its strategic and operational plans; and its corporate governance and risk management practices.

Applicants must also show they are ready to implement their digital solutions and sustainably grow their business within the Philippines, the BSP added.

The chief executive of Globe Fintech Innovations – the parent company of GCash, the Philippines’ leading mobile payments service provider – said it might seek a digital banking licence. In an interview with Bloomberg, Martha Sazon said applying for a digital banking licence was “being discussed” but that nothing was definite for now.

GCash is the Philippines’ most popular mobile wallet, with around 94 million users in a country with a population of around 115 million. The app allows users to send and receive money, pay bills, buy goods and services, and shop online.

Digital banking in Asia-Pacific

Several central banks in the Asia-Pacific region have set up licensing regimes for digital banking in recent years.

In June 2019, the Monetary Authority of Singapore announced it would issue up to two digital full bank (DFB) licences and three digital wholesale bank (DWB) licences. A DFB is allowed to take deposits from and provide banking services to retail and non-retail customers; a DWB can only do so to small and medium-sized firms and other non-retail customers. The authority has so far issued four digital bank licences.

The Hong Kong Monetary Authority has issued eight virtual banking licences since 2019. In a report on virtual banks published this month, the HKMA concluded that virtual banks in the territory had contributed to increased adoption of financial technologies and innovation in the financial sector, which it said had promoted financial inclusion.

However, the HKMA said the current number of virtual banking licences was “optimal” and it did not see a compelling reason to bring in more new players at the moment. It also launched a one-month public consultation on a proposal to officially rename virtual banks as “digital banks”, arguing that this could boost public confidence in the institutions.

The Bank of Thailand started accepting applications for virtual bank licences in March this year and plans to announce the results during the first half of next year. It has said it will limit the number of licences to three in order to maintain financial stability.