BSP to stop accepting digital bank applications for 3 years

MANILA, Philippines — The Bangko Sentral ng Pilipinas will stop accepting applications for digital banking licenses for three years to limit the players in the nascent industry and assess its impact on the country's banking system.

BSP Governor Benjamin Diokno made the announcement at a briefing on Thursday, Bloomberg reported. In a statement, the BSP said it won’t entertain new applications starting September 1, a deadline which applies to both new digital banks and incumbent lenders that plan to convert their existing licenses to a digital bank license.

“The closure of the application window will allow the BSP to monitor the performance and impact of digital banks on the banking system and their contribution to the financial inclusion agenda,” Diokno said.

“We need to ensure that the business environment continues to allow healthy competition among banks enabling them to offer innovative and competitive financial products and services to their clients,” he added.

According to the central bank, applications sent in until August 31 will be processed on a first-come, first-serve basis and will be assessed for completeness and sufficiency of documentation as well as compliance with the licensing criteria on the establishment of digital banks.

However, applications that do not meet BSP’s requirements, including those with missing documents, will be rejected.

The approval from the seven-member Monetary Board is the first step in the three-stage licensing process. Already, the Monetary Board gave digital banking licenses to five players: UNObank, UnionDigital Bank, GoTyme, Overseas Filipino (OF) Bank of state-run Land Bank of the Philippines, and Tonik Digital Bank.

More companies are expected to join¸ including Lucio Tan-owned Philippine National Bank, PayMaya’s Voyager Innovations and Yuchengco-owned Rizal Commercial Banking Corp. 

It was just last December when the central bank issued a circular creating a new bank category for virtual lenders. The BSP requires digital banks to have a minimum capitalization of P1 billion.

As it is, Diokno is hoping that digital banks can assist the BSP in achieving its goal of shifting 50% of total retail transactions in the Philippines to digital channels and raise the number of Filipino adults with bank accounts to 70% by 2023.