BSP caps digital bank licenses at six

THE BANGKO SENTRAL ng Pilipinas (BSP) has capped the number of digital banking licenses to six after the remaining applicants failed to meet the requirements, BSP Governor Benjamin E. Diokno said on Monday.

“We have approved six digital banks and it will remain at six,” Mr. Diokno told an annual conference event of the Financial Executives Institute of the Philippines (FINEX).

The BSP decided not to increase the number of licenses to seven as previously announced after the nine entities with pending applications failed to submit documentary requirements, he said.

Mr. Diokno said keeping the number of licensed digital banks at six for the meantime should allow regulators to closely monitor developments, and ensure there is healthy competition among digital banks and traditional lenders.

The application period for digital banking licenses ended on Aug. 31.

In a separate Viber message, the central bank chief said the Monetary Board (MB) could still reopen the window for applications if needed.

“The MB reserves the right to reopen the application subject to the need for more and the impact of the six digital banks on competition in the banking sector. Remember there are more than 500 universal and commercial, thrift, rural and cooperative banks already,” Mr. Diokno said.

He said one or two banks that secured their licenses are ready to operate, while others need more time to establish their operations.

Digital banks have a three-year window to operate after they get the license.

The first bank to obtain the new license was Overseas Filipino Bank, a subsidiary of state-owned Land Bank of the Philippines.

Also granted digital banking licenses were Tonik Digital Bank, Inc. (Philippines), UNObank, Aboitiz-led Union Digital Bank, and GOtyme, which is owned by the Gokongwei Group and Singapore financial technology (fintech) firm Tyme.

The BSP gave the sixth license to Maya Bank, the fintech arm of Voyager Innovations, Inc.

Mr. Diokno said lenders that gor their licenses are not required to set up branches or even branch-lite units, but are expected to maintain one headquarter office to minimize operating costs and focus their investments on new technology instead.

However, he said digital banks are also subject to “prudential requirements” that are imposed on traditional lenders.

Lenders with digital banking licenses are expected to help the BSP reach its goal of bringing 70% of Filipinos into the formal banking system and have 50% of transactions done online by 2023.

Mr. Diokno said the Philippines could still achieve a digital payments-driven and cashless society in 10 years.

“I see the day when you can now ride the tricycle and jeepney using your QR code, buy meat from the market through QR code. We are strongly pushing for this,” he said.

“It is really consistent with our desire to make the country a cash-lite economy from a cash-heavy society. In fact, it may even be a coinless society in five years,” he added.

DIGITAL CURRENCY
Meanwhile, Mr. Diokno said the BSP is not likely to adopt its own central bank digital currency anytime soon, but a task force is studying the matter.

“As new technology, items and cryptocurrency are becoming more popular among central banks, we exchange notes and we want to make sure that we do this safely,” he said. “So we have created a task force within BSP to study this so we’ll make the necessary arrangements as needed. But right now, we are not into digital currency yet but we will probably be there in a few years,” he added.

The central bank chief said 6.6 million basic deposit accounts were opened in 133 banks last year, with a combined amount of P4.7 billion as the pandemic prompted a general shift toward digital platforms.

The volume of electronic fund transfer through PESONet also surged by 164% year on year to 31.6 million in the first half of the year, while InstaPay transactions more than tripled to 201 million.

The country has 87 banks and electronic money issuers that have coursed transactions through PESONet and 52 via InstaPay so far, he said. — Beatrice M. Laforga with a report from Luz Wendy T. Noble