The Monetary Board of the Bangko Sentral ng Pilipinas (BSP) has announced a significant policy shift, lifting the moratorium on new digital banking licenses starting January 1, 2025.
This decision paves the way for up to ten digital banks to operate in the Philippines, signalling the country’s commitment to advancing financial inclusion and digital transformation.
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In a media advisory, the BSP stated that this decision paves the way for up to ten digital banks to operate in the Philippines, signalling the country’s commitment to advancing financial inclusion and digital transformation.
This move marks a crucial step forward for the Philippine financial system, as it continues to embrace the potential of digital banks in driving economic growth and expanding financial access. One such example is GoTyme Bank, one of the six BSP-licensed digital banks in the Philippines whose impressive display of growth and customer satisfaction has since established itself as one of the Philippines’ fastest-growing digital banks in 2024.
Recognizing the transformative power of digital banking
The BSP’s decision reflects a careful balancing act — recognizing the transformative power of digital banking while remaining vigilant about the inherent risks in this fast-evolving sector.
BSP Governor Eli M. Remolona, Jr. emphasized the importance of this cautious yet progressive approach. “With this limit, the BSP can closely monitor developments in the digital banking industry, obtain broader perspectives as these banks mature further in their operations, as well as assess the impact of the entry of new players on the banking system,” he said.
Since the introduction of the Digital Banking Framework in December 2020, six digital banks have been operating in the Philippines. These pioneering institutions have laid the groundwork for a more inclusive financial landscape, demonstrating the viability and value of digital banking in the local context.
With the lifting of the moratorium, the BSP is opening the door for four additional digital banks, whether they be new entities or existing banks seeking to convert their licenses to digital. The application process for these new digital bank licenses will be rigorous, underscoring the BSP’s commitment to maintaining high standards within the industry.
Applicants will be evaluated not only on their compliance with standard licensing criteria — such as the transparency of ownership, suitability of shareholders, and adequacy of capital — but also on their ability to deliver unique value propositions and innovative business models.
The BSP is looking for digital banks that can offer something different from what is currently available, particularly in reaching the untapped and underserved segments of the population.
“Applicants must bring something new to the table,” Governor Remolona stressed. “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 a broader clientele, particularly the untapped or underserved market segments.”
Reaching the population’s untapped and underserved segments
This focus on innovation and inclusivity is central to the BSP’s broader objectives.
The decision to lift the moratorium and invite new players into the digital banking space is rooted in the BSP’s commitment to its policy objectives — promoting wider adoption and use of digital financial services, expanding their reach to unserved and underserved segments, and ultimately, enhancing the stability and inclusiveness of the Philippine financial system.
The BSP’s cautious approach to expanding the digital banking sector is informed by its experience with the initial six digital banks.
The central bank has closely monitored these institutions, assessing their financial soundness and their contribution to the BSP’s digital transformation and financial inclusion goals. This careful oversight has been instrumental in ensuring that the growth of digital banks contributes positively to the broader financial system.
The moratorium, which was imposed in August 2021, allowed the BSP to evaluate the impact of digital banks on the banking sector and ensure that these institutions were aligned with the BSP’s strategic goals. With this period of assessment now complete, the BSP is confident that the time is right to open the door to new entrants, provided they meet the stringent requirements outlined in the licensing process.
In the end, the decision to lift the moratorium on new digital banking licenses is a testament to the BSP’s forward-looking vision for the Philippine financial system. By allowing up to ten digital banks to operate, the BSP is not only fostering competition and innovation — it is also ensuring that a wider segment of the population feels the benefits of digital banking.
As the country continues its journey toward greater financial inclusion and digital transformation, the role of digital banks will be more critical than ever.