Awaiting Regulation: Digital Banks in the Philippines

25 November, 2020

By McRey Banderlipe II | November 25 2020, 12:00 PM SGT
Photo by Christiann Koepke on Unsplash

No doubt, the current pandemic has changed the way people make transactions with institutions. To protect ourselves from the virus, people are encouraged to use digital platforms to avail of end-to-end processing in the delivery of goods and services. As face-to-face mechanisms may pose health hazards during this uncertain time, going digital may foster market efficiencies and provide an enabling environment towards increased access to goods and services even in the comfort of our homes.

In one of his speeches, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno shared that the Digital Transformation Roadmap for the Philippines aims to shift at least 50 percent of retail payment transactions to digital, and to have at least 70 percent of adult Filipinos own a transaction account by 2023. Having that transaction account gives them the opportunity to avail of financial services using digital platforms.

Digital banking is one of the solutions to address the banking services needed by people during the pandemic and as we usher in the “new normal” of banking landscapes. As economies begin to reopen gradually, wide use and access of Internet plays a vital role in delivering these services online to ensure business continuity as people shift to e-commerce, digital financial services, digital payments, and digital public services.

Pending the release of a BSP circular providing guidelines on the establishment of digital banks, the Monetary Board includes digital banks as a distinct classification of banks. BSP has recognized the role of digital platforms employed by banks to drive greater banking efficiency and expand its reach to the unserved and underserved market segments. Having a regulatory environment will provide space for responsible innovation, cyber-resilience and digitalization of the financial services industry.

This means that digital banks in the Philippines are expected to operate a business model applying robust, secure, and resilient technology infrastructure, effective data management strategy and practices, and sound digital governance. Also, digital banks are exposed to risks similar to those encountered by other classifications of banks under the Risk Management Framework. It is, therefore, imperative for digital banks to meet certain corporate governance and risk management standards following the principle of proportionality in terms of business model and risk profile.

In establishing these banks, BSP will require a minimum capitalization of Php1 billion and will adopt prudential standards in granting digital banking authority to those who meet the desired requirements. Other requirements and standards have yet to be finalized.

The eventual release of this regulation before year-end would beef up the digital banking landscape in the Philippines as more Filipinos will subscribe to digital platforms, thereby promoting inclusivity in the delivery of financial services.

 

 

References:

  1. https://www.bsp.gov.ph/SitePages/MediaAndResearch/SpeechesDisp.aspx?ItemId=753
  2. https://www.bsp.gov.ph/Regulations/Issuances%20of%20Policy%20Exposure%20Drafts/pexd3.pdf
  3. https://www.philstar.com/business/2020/11/23/2058693/bsp-issue-framework-digital-banks
Posted in

Related Articles

May 26, 2023

China-Central Asia Summit: Highlights, Lessons and Opportunities

By How Yong Yang As it practices its “Peripheral Diplomacy” with its neighbors along its borders, China recently concluded its inaugural in-person China-Central Asia Summit in Xi’an, the capital of northwest China Shaanxi Province. The city was the starting point of the millennia-old Silk Road. To enhance cooperation, Chinese President Xi Jinping has pledged a […]
May 15, 2023

Sustainable Finance for Energy Transition Efforts: An Update from Indonesia

By Dandy Satriatama A 2015 study, estimated that unmitigated climate change could drastically reduce the income of the average person on Earth by roughly 23 percent in the year 2100. The findings further indicate climate change will widen the global inequality between rich and poor countries. The world’s poorest 40 percent of nations are predicted […]
May 10, 2023

De-dollarization: Gaining momentum in Southeast Asia? 

By Victoria Hyde De-dollarization is nothing new, but could the latest trend away from the dollar prove long-lasting?  The US dollar has been the dominant global currency for decades, with countries around the world using it as a means to exchange, store value, and manage their respective domestic currencies. After the US emerged as a […]