BSP okays PHL digital banking framework
THE Bangko Sentral ng Pilipinas (BSP) on Thursday announced that it has approved the Philippines’s digital banking framework.
The framework aims to recognize digital banks as a new bank category separate and distinct from the existing bank classifications.
Digital bank is defined as a bank that offers financial products and services that are processed end-to-end through a digital platform and/or electronic channels with no physical branches.
“Digital banks will play an important role in the digital financial ecosystem. We see these banks as additional partners in further promoting market efficiencies and expanding access of Filipinos to a broad range of financial services, bringing us closer to the realization of our target that at least 50 percent of total retail payment transactions have shifted to digital, and 70 percent of adult Filipinos have transaction accounts by year 2023,” BSP Governor Benjamin Diokno said in a statement.
Under the new framework, digital banking applicants are expected to have sound digital governance, robust, secure and resilient technology infrastructure, and effective data management strategy and practices.
“The BSP recognizes that digital banks are exposed to the same financial risks faced by conventional banks with potential elevated exposure to cybersecurity and money laundering risks. As such, digital banks would be subject to the same prudential requirements applicable to other types of banks with recalibration to be commensurate to their business model and risk profile,” the BSP said in a statement.
BSP data shows that during the pandemic, some 4.6 million in basic deposit accounts were opened, with aggregate value of deposits at P4 billion.
Diokno said they are expecting more transaction accounts to be opened as more online providers, as well as the government, are growing more and more digital as catalyzed by the restrictions in movement and travel.
“It is our long-term goal to see more digital-savvy Pinoys, such that it becomes second nature for them to perform routine financial transactions online—making payments and fund transfers, or availing of credit, insurance, and investments,” Diokno said in a separate speaking engagement.
Other provisions under the framework include the authorization of digital banks to tap cash agents and other qualified service providers subject to existing regulations to complement the innovative delivery of financial services.
They are also expected to maintain a principal place of business in the Philippines to house the offices of management and other support operations and serve as the main hub for customer concerns handling and point of contact for stakeholders, including the BSP and other regulators.
In light of this, the BSP said they may limit the number of digital banks that may be established considering the total number of applications received and the assessment of the overall banking situation.
“Essentially, the BSP is looking to attract players with strong value proposition, sufficient financial strength, technical expertise of management and effective risk management,” Governor Diokno said.