1 month ago
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Interested players aiming to enter the Philippine digital banking sector must propose innovative business models and address specific market needs, according to a senior official from the Bangko Sentral ng Pilipinas (BSP).
“The requirement from the governor and the Monetary Board [MB] is that they [interested players] must have a very good value proposition,” said Chuchi G. Fonacier, BSP deputy governor for the financial supervision sector.
“The business model cannot be the same as an existing player’s. It has to be a very good value proposition in that they will be addressing a specific need of the current market and at the same time bring in innovative business models,” Fonacier told reporters during a two-day media information session held in Baguio City.
Such is the central bank’s requirement for the interested players because “the existing ones take a long time to earn,” Fonacier said. She, however, noted that this is a normal development for businesses.
“Some are looking at a five-year timeline before they can start earning. The earliest we’ve seen so far is three years. They’re really new, so it will take time,” she said.
Fonacier also said the BSP will assess all future applications based on a thorough evaluation. "As part of that, they will have to walk through the BSP, specifically explaining what they intend to do, which market they will target, and what type of business model they have. It’s not just about submitting documentary requirements; they really need to describe their business model,” she explained.
Currently, six digital banks have been granted digital banking licenses by the central bank. These include Overseas Filipino Bank, Tonik Digital Bank, UNObank, UnionDigital Bank, GOtyme, and Maya Bank.
On Jan. 1, 2025, the BSP lifted the ban on new digital banking licenses in the Philippines, opening up opportunities for new players to enter the sector.
Of the six existing players, Fonacier said that only two remain profitable, noting that their competitive edge lies in the fact that “they already have an ecosystem. That's where they serve. Those are their depositors, and that's also their market for loans because they already know the needs of this group and how to package their loan products.”
According to Fonacier, the challenge for digital banks now is extending loans without face-to-face interaction. This requires strong credit scoring systems to target the right market, minimizing the risk of non-performing loans (NPLs).
Fonacier further said that to package loan products, digital banks need data and analysis to match borrowers’ cash flow with the product.
She noted that the two established players have the advantage of already knowing their market, while new digital banks must start with data to address their target market’s needs.
“So these prospective players should be able to really come up with something different from the existing six,” Fonacier reiterated.
To date, the central bank has yet to receive formal applications from interested players, but she noted that two potential players are “very interested” in operating in the Philippines. However, they are still completing the documentary requirements to proceed with the formal filing.
The applications of the two interested players will not be approved automatically just because they filed first.
