Philippines Is The Latest to Approve a Digital Banking Framework
The Monetary Board approved the recognition of digital bank as a new bank category that is separate and distinct from the existing bank classifications. A 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. This is after teasing its release for the past few months.
The Philippines central bank is the latest to approve the framework following the footsteps of its Singaporean and Hong Kong counterparts and Malaysia is who is currently still in draft stages.
The new policy forms part of the BSP’s Digital Payments Transformation Roadmap, and enables players towards a more streamlined, technology-driven and inclusive financial ecosystem.
BSP Governor Benjamin E. Diokno said,
“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 realisation 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. This is seen to remove sticky points and leapfrog our financial inclusiveness agenda.”
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 recognises 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 Monetary Board 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.
BSP is said to be looking to attract players with a strong value proposition, sufficient financial strength, technical expertise of management, and effective risk management according to Governor Diokno.
“The Fintech Alliance and the entire Philippine digital industry welcome the approval of the digital bank licensing regulations. Coupled with the recently released draft on the guidelines on open finance framework and a comprehensive digital payments transformation roadmap, the Philippines is poised as an emerging digital hub in the Asia Pacific region.
We are seeing more foreign technology players coming in and traditional banks levelling up to be at par with the increasing competition towards creating its own hybrid neo-banks. These developments present an expansive array of choices to consumers. Consumers are the ultimate winners. At the end of the day, it is all about delivery of awesome customer experience and unique value proposition”
said Lito Villanueva, Fintech Alliance.ph Chairman and RCBC Executive Vice President and Chief Innovation and Inclusion Officer.
In line with these recent developments, Fintech News during a recent webinar, sat down with experts from CIMB Bank, RCBC, Finastra and Microsoft, to discuss how the issuance of the digital banking license will trigger a wave of innovation for the unbanked in the Philippines.