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.