BSP wants quality digital banking

Published October 19, 2020, 6:00 AM

by Lee C. Chipongian

The central bank wants digital bank players that will be “tenacious” or strong enough to withstand risks such as fraud and cyberattacks, and that these online-only banks will last a long time.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno ( Bloomberg )

 “We will put emphasis on the quality over quantity of players in expanding the digital financial ecosystem,” said Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno.

“Essentially, we’re looking to attract players with strong value proposition, sufficient financial strength, management expertise and excellent risk management which could be our ‘tenacious’ partners in achieving the shared goal of on boarding more Filipinos in the financial system,” said Diokno.

The BSP this month circulated the second draft circular for the establishment of digital banks in the country. These banks, which are proposed to have a minimum P1 billion capitalization, are expected to contribute to the “greater efficiency in the delivery of financial products and services and in expanding reach into the unserved and underserved market segments.”

 Diokno said they want digital banks that have cyber resilience and will advance the financial sector’s digitalization.

 Part of the proposed circular is to allow existing banks with traditional brick and mortar branches to convert to digital banks. With conversion and new entrants that include non-banks, the BSP will set a limit on the number of approved digital banks.

Diokno said the BSP “reserves the right to set a limit on the number of digital banks’ entrance considering the number of applications received.”

“The numerical limit will depend primarily on the number of digital banking applications that we will receive and our assessment of the overall banking situation,” he added.

Diokno said the BSP currently are conducting exploratory talks with “quite a number of parties such as local banks and non-bank corporations, as well as foreign individuals and non-bank corporations that have signified interests on the establishment of digital banks.”

Giving out a new classification of banking license as digital banks is part of the BSP’s three-year digital payments transformation roadmap which it launched last week. The roadmap aims to lay down a digital financial ecosystem that is supportive of financial inclusion, said Diokno. The BSP is targeting to have 50 percent of retail payment transactions to shift to digital and 70 percent of adult Filipinos to have formal accounts by 2023.

 In a statement over the weekend, the BSP said the Financial Inclusion Steering Committee which now includes the Philippine Commission on Women, during its 9th meeting last week agreed to promote digital payments as “an imperative for financial inclusion in the new economy, and to collectively shepherd statutory issuances that can liberalize the use of satellite technology and services to address the challenges in internet connectivity.”

The BSP said FISC also talked about other initiatives such as harmonization of government efforts to digitize collections and disbursements, payment of private sector wages through transaction accounts, and digitization of the distribution of benefits under the Social Amelioration Program.

The momentum of the BSP’s digital payments transformation roadmap has been catalyzed by the recent lockdowns brought about by the COVID-19 pandemic.