The Bangko Sentral ng Pilipinas (BSP) will likely cap digital bank licenses at seven for the next three years as it wants to monitor these new lenders and allow them to offer competitive products and services, BSP Governor Benjamin E. Diokno said on Thursday.

Mr. Diokno said the Monetary Board on Aug. 12 decided to extend its cap to seven digital bank licenses from five previously and will close the window for applications, including for those seeking to convert their existing licenses, on Aug. 31.

“The judgment of the Monetary Board is that we will keep it closed [at seven digital banks] for three years so that we can closely monitor and so we can gain experience on digital banking,” he said.

“So if there is a need for lifting the limit, we will do so. But if under our judgment, seven is enough, then there will be no additional digital banks in the future,” Mr. Diokno added, noting that other countries have also limited the number of digital banks allowed to operate.

“We need to ensure that there is healthy competition among banks, enabling them to offer innovative and competitive financial products and services,” he said. “As these tech-savvy, customer-centric players introduce innovations in the banking sector, we are confident that the BSP is on track to achieving its digitalization and financial inclusion goals.”

The central bank chief said applicants must submit their complete documents on or before Aug. 31. Applications that will be received on or before Aug. 31 that will have documentary deficiencies or those that do not meet pre-qualification criteria set by the BSP will be returned, Mr. Diokno added.

The BSP is currently processing two license applications, he said.

“We have made it clear, it’s on a first come, first served basis. Your chances of getting in are very slim because that assumes that the two pending applications that are being processed will be disqualified, or that they will not be able to comply with all requirements,” Mr. Diokno noted.

The Monetary Board in November approved the digital banking framework, which set these lenders apart from commercial, thrift, rural, and Islamic banks.

Digital banks mainly offer their products and services through an online platform, in contrast to traditional lenders’ brick-and-mortar model. These all-online banks are expected to help the BSP reach its goal to bring 70% of Filipino adults into the banked population and 50% of payments done online by 2023.

The framework initially capped new licenses at five, and the BSP granted the country’s fifth digital banking license to a partnership between the Gokongwei Group and Singapore-headquartered Tyme called GOTyme, the firms said earlier this week.

The four other licenses were given to state-owned Overseas Filipino Bank, Tonik Digital Bank Inc. (Philippines), UNOBank, and UnionBank of the Philippines, Inc.’s Union Digital Bank.

The Monetary Board approval corresponds to the first of the three-stage licensing process. — L.W.T. Noble

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