The Bangko Sentral ng Pilipinas (BSP) announced on Wednesday, Aug. 24, that the country’s six digital banks are now operational.
Of the six, three are fully operational but the other three are still on a limited run.
Government-owned Overseas Filipino Bank Inc. A Digital Bank (OFBDB), Tonik Digital Bank (TONDB) and MAYA Bank are all fully operational. OFBDB is controlled by Land Bank of the Philippines while MAYA is a subsidiary of the PLDT Group. TONDB, meantime, is owned by Tonik Financial Pte Ltd. of Singapore.
UNObank Inc. (UBI), UnionDigital Bank (UDB) and GoTyme Bank Corp. (GTYME) have also started operations but on a limited capacity targeting select customers, said the BSP.
UBI, like TONDB is Singaporean-owned. UDB is a unit of Aboitiz-led Union Bank of the Philippines while GTYME is a sister bank of Gokonwei group’s Robinsons Bank.
The BSP said that operating initially under limited capacity is a conservative approach adopted by these digital banks to “further ensure that all aspects of their digital operations are ironed out prior to fully launching their services to the public.”
“UBI, UDB and GTYME are expected to publicly launch within the second half of this year,” said BSP.
OFBDB, TONDB, UBI and MAYA were authorized to operate in the first quarter this year while UDB and GTYME were given the go-signal in July.
The BSP issues the certificates of authority or COA to Operate to digital banks that have substantially complied with the BSP’s conditions for approval and pre-operating requirements. These include capitalization, risk and governance structure, and information technology systems, among others.
The BSP explained that the process for securing a COA to Operate begins with the application to establish a digital bank, to be approved by the Monetary Board. Once approved, the BSP issues a COA to Register to be submitted to the Securities and Exchange Commission. After registration and completion of all other requirements, digital banks may then obtain the COA to Operate from the BSP.
The BSP has granted six digital bank licenses in 2021 before closing the application window for two years or until 2023.
Before the BSP released the digital banking framework in 2020, there are already two existing digital banks in the country, such as Malaysia’s CIMB and Dutch-owned ING. The two foreign banks, however, did not apply for a BSP digital bank license.
Digital banks, unlike brick and mortar banks, have no physical branches. But BSP requires these banks to set up one office in Metro Manila.
Digital banks’ financial products and services are processed end-to-end through a digital platform or electronic channel. They also offer traditional savings and time deposit accounts through mobile-friendly lending and investment facilities.
These banks likewise offer “quick and easy access” to low interest corporate loans or unsecured credit lines for micro, small and medium enterprises (MSMEs).
Specifically, digital banks can cater to MSMEs with low or no digital footprint in terms of historic electronic financial data. A common strategy for these digital banks is to engage MSMEs through simple and quick deposit onboarding, then empower them with business solution platforms that facilitate the digitalization of MSME operations.
To set up a digital bank, the BSP requires a minimum capitalization of P1 billion.