THE CENTRAL BANK is looking to release its digital banking policy framework this year to provide guidance to financial institutions targeting to provide such services.

“Digital banks are expected to deliver services appropriate to the needs and capacity of Filipinos particularly families with low disposable income,” Bangko Sentral ng Pilipinas Governor Benjamin E. Diokno said on Thursday.

“The BSP is in the final states of the policy formulation process. We hope to issue the policy before the end of the year,” he added.

Under the central bank’s three-year digital payments transformation road map, the BSP will make a distinct classification for digital banks.

By definition, digital banks will have zero or minimal reliance on physical touch points as compared to traditional lenders, Mr. Diokno said.

Despite this, digital banks are still expected to comply with the same standards of corporate governance and risk management required from brick and mortar lenders.

“This will include information technology, cybersecurity, outsourcing, consumer protection and anti-money laundering and countering the financing of terrorism,” Mr. Diokno said.

The BSP chief said “quite a number” of local lenders, quasi-banks, and foreign entities already expressed interest in establishing digital banks in the Philippines.

“Upon release of the subject guidelines, we will start accepting applications for authority to establish digital banks, but the BSP reserves the right to set a limit on the number of digital banks’ entrance considering the number of applications received as well as the developments and overall banking situation,” he said.

Under House Bill 5913 also known as the Virtual Banking Act of 2020, the BSP can grant licenses to operate to no more than five virtual bank applicants every year for five years. The Monetary Board may then increase or decrease this limit afterwards.

Albay Representative Jose Maria Clemente S. Salceda, who is also the Chair of the House Committee on Ways and Means, filed House Bill (HB) 5913. He said the bill is expected to encourage virtual banking in the Philippines to flourish into a P903-billion industry. The bill is still pending in Congress.

Among current digital-only lenders in the Philippines include CIMB Bank Philippines, Inc. and ING Bank N.V.-Manila. Both are known for offering deposit rates of up to 4% annually and some lending propositions in order to encourage more users to join.

The BSP sees digital banks helping boost financial inclusion among Filipinos. 

“Licensing digital banks will bring us closer to our goal of shifting at least 50% of retail payment transactions to digital channels and ensuring 70% of Filipino adults have transactional accounts by year 2023,” Mr. Diokno said.

Only 29% of Filipino adults had formal accounts in financial institutions in 2019, leaving about 51.2 million unbanked, BSP data showed. In 2017 to 2019, about five million Filipinos were able to open an account. — L.W.T. Noble