Firms a la digital banks need proper license soon

The Bangko Sentral ng Pilipinas (BSP) will require financial entities that are not digital banks but operating and behaving like one to convert their existing license to that for virtual lenders so they can be regulated properly, an official said.

Speaking to reporters, BSP Senior Director Melchor Plabasan said those that would be compelled to get a proper license must comply with all the regulations for digital banks, including the minimum capitalization of P1 billion and other prudential requirements.

“[This is] so we can also transition their license from, let’s say rural bank or thrift bank, to digital bank. Because if you’re already behaving like a digital bank, you should be regulated like a digital bank, not a rural bank,” Plabasan said.

“That’s why the intention really is to minimize the arbitrage,” he added. “If the BSP has a basis for us to convert their license, then we will require them.”

READ: New digital banks set to fire up competition for deposits

As it is, operating as a digital bank is much more expensive compared to doing business as a rural bank, which is only required to maintain a minimum capital of P200 million at most depending on the number of branches. As such, some players are taking the rural banking route to set up such operations.

Getting the correct permit means these companies would have to join the race to get the four new digital banking slots that will be up for grabs next year.

The BSP will resume accepting applications for digital banking licenses starting 2025, in a bid to expand the industry that for now includes only six players: UNO Digital Bank, UnionDigital Bank, GoTyme, Overseas Filipino Bank of state-run Land Bank of the Philippines, Tonik Digital Bank and Maya Bank.

Already, Plabasa said the BSP has received queries from companies that are interested in joining the nascent industry.

“There are existing players who would like their license to be converted to a digital bank. And there are also foreign players that have signified interest to enter the Philippine market,” he said.

“The four openings would be a combination of new entrants and existing players whose license will be converted to digital banks,” he added.

Higher requirements

But getting a digital banking license won’t be easy this time.

The BSP had said only the applicants that show capacity to meet the minimum criteria and offer a unique value proposition—or develop new and innovative business models not offered

by existing players—would be granted a digital banking license.

This rigorous licensing process, Plabasan said, would be “good” for incumbent players, adding that BSP won’t try hard to fill all four digital banking slots if none of the applicants can meet the tighter requirements.

“They have to offer something new to the table. So if no one meets the additional requirements, then we will stay with the existing number,” he said. —Ian Nicolas P. Cigaral