The Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, has announced the lifting of its moratorium on the issuance of new digital banking licenses, effective January 1, 2025.
The decision, approved by the Monetary Board, will allow up to ten digital banks to operate in the Philippines, marking a significant step in the central bank’s efforts to enhance financial inclusion and digital transformation in the country.
The move follows the successful implementation of the Digital Banking Framework introduced in December 2020, under which six digital banks have already been established.
The lifting of the moratorium will create room for four additional digital banks, either through the issuance of new licenses or the conversion of existing bank licenses.
BSP Governor Eli M. Remolona, Jr. emphasized that the decision to limit the number of digital banks to ten is strategic, allowing the central bank to closely monitor the sector’s growth and assess the impact of new entrants on the overall banking system. He said:
With this limit, the BSP can closely monitor developments in the digital banking industry, obtain a broader perspective as these banks mature further in their operations, as well as assess the impact of the entry of new players on the banking system.
The reopening of the application window for digital bank licenses will subject new applicants to a rigorous evaluation process. The BSP will scrutinize potential entrants based on their value proposition, business models, and resource capabilities.
In addition, applicants must meet standard licensing criteria, including transparency in ownership and control, suitability of shareholders, fitness and propriety of directors and senior management, adequacy of capital, and robust corporate governance and risk management systems.
Governor Remolona highlighted the importance of innovation in the selection process, noting that only those applicants who can offer unique value propositions or innovative business models not currently available in the market will be granted a license.
“Applicants must bring something new to the table. We want to see unique product and service offerings that are different from those offered by existing market players. These offerings should have significant potential to reach broader clientele, particularly the untapped or underserved market segments,” he said.
The BSP’s decision to lift the moratorium is informed by its assessment of the current digital banks’ performance and their alignment with the policy objectives of the Digital Banking Framework.
This framework aims to promote wider adoption of digital financial services and expand access to these services for unserved and underserved segments of the population.
The BSP initially capped the number of digital bank licenses at six and closed the application window on August 31, 2021, to monitor the new sector’s impact and ensure that digital banks contributed effectively to the central bank’s goals of financial inclusion and digital transformation.
By reopening the licensing process, the BSP aims to foster a more inclusive and digitally-driven financial landscape in the Philippines, while ensuring the stability of the financial system.
The new licenses are expected to be awarded after a thorough review process that will begin once the moratorium is officially lifted in 2025.
