Aboitiz-led Union Bank of the Philippines (UnionBank) will put up a new digital bank unit, Union Digital Bank (UnionDigital), making it the first local privately-owned and listed commercial bank to be granted a digital bank license in the country.
UnionBank President and CEO Edwin Bautista said that UnionDigital “is going to be the principal vehicle for UnionBank to service and support the lower end of the market—the unbanked. This is our vehicle for inclusive prosperity.”
Bautista said if UnionDigital gets to a place where they want it to be, they could consider converting the mother bank, UnionBank, to go the same route, presumably as an all-digital bank.
“If it works for the digital bank then, in the future, we might be able to consider applying the same engine to our mother bank,” said Bautista during the Bangko Sentral ng Pilipinas’ (BSP) 4th BSP Webinar Series with the theme “The Age of Digital Banking”.
Bautista said they will create and establish its new digital bank subsidiary from scratch. This is preferable than changing the existing bank setup which is a licensed commercial bank since it will be similar to “changing the engine while the car is running.”
UnionBank believes that putting up another digital bank unit is the more strategic plan, allowing the bank to “pause and re-create the ideal digital bank that will run differently having a different set of engines.”
The BSP approved UnionBank’s digital bank license last July 15. It is the first publicly listed bank to be granted a digital banking license.
BSP Circular No. 1105 (Guidelines on the Establishment of Digital Banks), approved in November 2020, require all banks with digital banking services to apply for the appropriate digital bank license based on the new circular’s transitory provision. It states that existing banks may apply for conversion to a digital bank and that the BSP may likewise require banks that already meet the definition of a digital bank under the new circular to convert their existing banking license to digital banking license.
A digital bank license is the BSP’s seventh bank category. It has a P1 billion minimum capital base requirement.
UnionBank is the fourth applicant to be granted digital bank license. The first is a government-owned bank, and the next two digital bank license was granted to a Singapore digital bank and a financial technology company, also from Singapore.