The competition to be the top digital bank in the country has been going on for a year now but the new online-only banks have one common goal: to go global.

To achieve this, the six digital banks temporarily set aside their rivalry and created their own grouping, called the Digital Banking Association of the Philippines (DBAP), which has been endorsed by the Bangko Sentral ng Pilipinas (BSP). This is a smaller version of the Bankers Association of the Philippines.

DBAP is composed of UnionDigital Bank, government-owned Overseas Filipino Bank Inc. of Land Bank of the Philippines; Tonik Digital Bank of Tonik Financial Pte Ltd. of Singapore; UNObank Inc. of Singapore; GoTyme Bank Corp. of the Gokongwei Group’s Robinsons Bank; and Maya Bank of the PLDT Group.

According to UnionDigital Bank President and CEO, Henry Aguda, the establishment of the DBAP is a “collective victory” that will help launch Philippine digital banks to be front and center in the global banking arena.

He is confident that the “Philippine banking (sector) is ready for the global stage.” This is despite the fact that the Philippines is a latecomer in the digital banking space compared with other Asian banking systems that already had footprints in the digital banking sector.

Aguda confirmed that the BSP has endorsed the establishment of the DBAP which is an initiative “aimed at addressing the immediate priorities necessary for the prosperity and success of digital banks in the Philippines.”

"As we emerge as the fastest to profit digital bank in the Philippines, the endorsement of the DBAP by the BSP is testament to the strong support of our regulator to the future of this industry. This initiative not only reflects our commitment to innovation but also reaffirms the BSP's dedication to the growth and prosperity of (Philippine) digital banks. Together, we're shaping a dynamic future for the industry,” added Aguda.

Race to No. 1

UnionDigital is the digital bank subsidiary of Aboitiz-led Union Bank of the Philippines. Even before the BSP first drafted the digital banking framework in 2020, in the middle of the first year of the global Covid crisis, Union Bank was already marketing itself as a digital bank pre-pandemic.

Aguda said UnionDigital has already cornered about 75 percent of market share in the digital banking market. As of end-June this year, the bank’s deposit base grew by 113 percent to P20 billion and its loans were up by 126 percent to P13 billion.

There are only six banks with digital banking license in the Philippines. Most of the digital banks started operations within the first six months of 2022.

If UnionDigital is claiming top position with 75 percent market share, Maya said it has 61 percent market share and is also claiming to be the most popular digital bank in the country.

Maya stated that it has 71 percent of total depositors in the market, and 46 percent of the total deposit balance versus its five other competitors. As of end-June this year, the PLDT unit said it has 2.3 million depositors with P25 billion in deposits compared to UnionDigital’s P20 billion.  

Maya Group President and Maya Bank co-founder Shailesh Baidwan said recently that their all-in-one digital banking thrust is “working for our customers” and their seamless digital banking has more reach, especially with its accelerated fintech adoption.

Maya said it has “ecosystem advantage” being first-to-market gamified savings, daily interest crediting, username, and AI-driven credit. Basically, Maya, formerly Paymaya, has merged its e-wallet with its banking products and investment platform under its digital banking setup.

Meanwhile, GoTyme had a late launch last year, around October, while its competitors were months ahead. It has not provided updates on numbers such as deposit base but it is not lacking in ambition, backed by its conglomerate parent and its foreign partner, South Africa-based Tyme Bank Group.

In a previous press briefing, GoTyme CEO and President Nathaniel Clarke said in time, with their retail partners – “we can actually (become) the biggest bank in the country.”

Clarke said GoTyme is not just competing against other digital banks but also with the traditional banks as well. He viewed Union Bank and its subsidiary UnionDigital as its rival in the short term. But for the longer term strategy, he considers the country’s largest lender, BDO Unibank Inc., as GoTyme’s goliath.

More digital banks in the future

With its ongoing review, BSP may have enough reasons to decide to reopen the window for digital bank license applications sooner than expected, such as if they think the digital bank market needs more room to grow.

The BSP issued Circular No. 1105 in December 2020 for the establishment of digital banks.

Before the BSP released the digital banking framework, there are already two existing digital banks in the country -- Malaysia’s CIMB and Dutch-owned ING. The two foreign banks, however, did not apply for a BSP digital bank license.

BSP Governor Eli M. Remolona has said that “pretty soon we’ll be able to allow more digital banks.”

The BSP already closed the window for digital bank applications for three years, or from September 2021 until the fourth quarter of 2024.

However, almost two years since the application window was closed, the BSP is studying its reopening earlier than scheduled. “We’re expanding our capacity to work with digital banks,” said Remolona in July.

As of Aug. 31, 2021, the central bank only granted six licenses. The BSP has limited the number of digital banks to allow them the space to closely monitor the performance and impact of digital banks to the banking system and their contribution to the financial inclusion agenda.

A digital bank is the BSP’s seventh bank category. It requires P1 billion minimum capitalization to set up.

Digital banks have minimal or zero-reliance on physical touchpoints but it will have to set up one office in the Philippines to receive and address customer complaints or issues.

Meanwhile, 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.