Digital banks finally arriving at the Philippines

Digital banks - also known as neobanks - are actually preparing their industry entry in to the Philippines as the country’s central bank is definitely along the way of issuing them licenses by 2022, according to a written report by S&P Global Industry Intelligence.

The Bangko Sentral ng Pilipinas in November 2020 approved a new license category for digital banking institutions and since has received two applications as of February this year, one from a new player and the other from a preexisting bank to convert right into a digital bank, the report cited the central bank’s deputy governor Chuchi Fonacier as saying.

He emphasised that digital banking institutions specifically could improve fiscal inclusion because they would decrease the barriers that hinder economic access for clients with little and irregular profits, geographical distance and insufficient proper documentation.

Digital banking to aid financial inclusion

The digital technology of such Internet-only neobanks may possibly also offer financial products that would bridge the marketplace gaps in the unserved and underserved segments, he added.

As a background, banking penetration in the Philippines is one of the lowest in Southeast Asia. The number of unbanked Filipino parents was estimated at 51.2 million, out of a complete adult population of 72 million in 2019, according to the central bank, which sees the digital banking framework as an intrinsic component of is efforts toward the transformation of the Philippine financial sector.

The mark set by the central bank is to shift at least 50 % of most retail payment transactions to digital platforms and have 70 % of adults to use digital bank accounts by 2023, Fonacier said.