Local digital banks raise $700M in capital

MANILA, Philippines — Global and local investors have poured more than $700 million into the domestic digital banking sector, with the nascent industry taking it as a sign of investor confidence as it navigates the path to profitability.

The amount represents the capital that this new breed of lenders has secured since 2021, according to data from the Digital Bank Association of the Philippines (DiBA PH), an industry group composed of the country’s six digital banks.

“The significant and continued investment in the digital banking industry sector is a strong vote of confidence in its ability to stimulate economic growth, create jobs, and broaden access to savings and credit,” said Angelo Madrid, president of DiBA PH and Maya Bank, one of the country’s digital banks. The others are UNO Digital Bank, UnionDigital Bank, GoTyme, Overseas Filipino Bank of state-run Land Bank of the Philippines, and Tonik Digital Bank.

DiBA PH said the sector used the cash it raised from investors to entice more depositors. Industry figures showed the digital banking system posted a 27- percent growth in their depositor base between September and December last year, significantly higher than the overall banking system’s growth of 4 percent.

READ: Unionbank’s digital banking unit gets P900-M infusion

That elevated the total digital banking depositor base to 5.9 million by the end of 2023, with DiBA PH reporting a near doubling of deposits to P69 billion from 2022 to 2023.

But despite the healthy deposits, digital banks are still struggling to deploy these funds, posing a challenge to these lender’s ambition to become profitable.

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Data from the Bangko Sentral ng Pilipinas (BSP) showed the industry’s nonperforming loans (NPL)—or borrowings that are more than 90 days late on a payment—amounted to P4.92 billion in February, up by 7.66 percent from P4.57 billion in January. —Ian Nicolas P. Cigaral INQ