Digital Banking in the Philippines
Digital Banking Overview in the Philippines
Digital banks are seen to play a vital role in adopting new technological innovations in financial services that will reach more Filipinos, achieving financial goals by 2023.
What is a Digital Bank?
Digital bank is a bank with no physical branches/sub-branch or branch-lite unit and offers financial products and services that are processed end-to-end through a digital platform and/or electronic channels.
Its main office is for housing management offices and support operations, communicating with stakeholders, including the BSP, and processing complaints filed by consumers.
A Digital Bank may perform any or all of the following services:
- Grant secured or unsecured loans,
- Accept savings and time deposits,
- Accept foreign currency deposits,
- Invest in readily marketable bonds and other debt securities, commercial papers, and accounts receivable, drafts, bills of exchange,
- Act as a correspondent for other financial institutions,
- Act as a collection agent for non-government entities,
- Issue electronic money products,
- Issue credit cards,
- Buy and sell foreign exchange,
- Present, market, sell and service microinsurance products subject to guidelines.
A digital bank may also perform other activities subject to prior Monetary Board approval and subject to relevant rules and regulations.
Why did the BSP close the application period for digital banks immediately?
The closure of the window of application for digital bank license effective 31 August 2021 is aligned with the overall thrust of maintaining a stable and competitive environment for banks.
How long is the moratorium on the grant of digital bank licenses?
Three years from the effectivity of Circular No. 1105, or until December 2023.
Newly-licensed digital banks will be assessed as to their performance and impact on the banking sector including their contribution to the attainment of financial inclusion goals.
In the three-year period, will there be no additional digital banks in the Philippines?
The limit in the number of digital bank licenses may be modified or lifted at any point, as warranted, subject to review and approval of the Monetary Board.
What is the benefit of digital banks compared to existing banks?
Digital Banks are seen to fuel healthy competition in the banking sector through innovative, safe, convenient, and more affordable products and services, especially for the unbanked and underserved population.
Existing banks are expected to digitize processes in order to offer competitively priced products and services that will benefits the customers.
How safe are digital banks?
Similar to existing banks that have been granted license to operate, these Digital Banks have undergone a rigorous licensing process involving assessment of all critical aspects – from the suitability of shareholders, the fitness and propriety of directors and senior management, to their financial strength.
Digital Banks are expected to have effective governance structures and risk management processes that appropriately identify, measure, monitor and control the risks attendant to their business model, strategies, processes, and products.
In this respect, digital banks shall be subject to the same standards on corporate governance, risk management, compliance, internal control, and audit, and reporting governance, consumer protection, anti-money laundering, among others, that are applicable to other banks categories.
Moreover, as a BSP supervised bank, deposits with a digital bank are insured by the Philippine Deposit Insurance Corporation (PDIC) in accordance with relevant laws, rules, and regulations.
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