BSP: Digital banks struggling with loan collections

The Philippines’ nascent digital banks are “still struggling” with their online lending activities, Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. said, adding that the regulator is looking for ways to fix the problem.

While the digital banks are “very successful” in raising deposits online, Remolona said at a forum last week that these lenders are facing challenges “on the asset side.”

“It seems to be very hard to make loans online. And it seems to be very hard to collect on loans online,” the BSP chief said.

“In the Philippines, it seems you need a human being to collect. But maybe there’s a way to overcome that. And that’s why we only have six licenses so far,” he added.

In 2021, the BSP imposed a three-year moratorium on applications for digital banking licenses.

The closure of the application window was meant to give the central bank enough time to monitor the performance of the digital banks and their impact on the banking system.

So far, the Monetary Board gave digital banking licenses to six players: UNObank, UnionDigital Bank, GoTyme, Overseas Filipino (OF) Bank of state-run Land Bank of the Philippines, Tonik Digital Bank and Maya Bank.

In October last year, Remolona said the BSP was looking at lifting the moratorium on obtaining digital banking licenses as more players have expressed their interest in joining the industry.

The BSP hoped that digital banks can help the government reach its ambition of shifting 50 percent of total retail transactions in the Philippines to digital channels, and raise the proportion of Filipino adults with bank accounts to 70 percent by 2023. —Ian Nicolas P. Cigaral INQ