Philippines: Digital Banking Sector Eyes Growth Through Central Bank Collaboration

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Digital banks are now seeking to engage with the Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, to establish multilateral relationships and foster an open banking ecosystem. This initiative aims to attract more borrowers and support the operation of digital banks in the country.

The primary goal of digital banks is to provide convenient access to various financial services, including payments, remittances, and bank accounts, especially targeting the unbanked and underserved sectors.

This approach is irrespective of geographical location and aims to promote financial inclusion.

During the 2024 Annual Reception for the Banking Community in Manila, BSP Deputy Governor Chuchi Fonacier highlighted the banks’ intent to partner with the BSP.

“They want to enter a partnership with the BSP to make the public aware of their specific bank category,” Fonacier said in an interview with local newspaper The Daily Tribune.

Currently, the Philippines hosts six digital banks: GoTyme, Maya Bank, Overseas Filipino Bank, Tonik Bank, UNO Digital Bank, and UnionDigital Bank.

Discussions between the BSP and the Digital Bankers Association are ongoing to determine effective strategies for achieving their collective goal.

The BSP is considering a literacy program on digital banks, akin to its existing FinEd Program on financial inclusion.

“We’re engaging with them. Maybe we’ll be coming up with some kind of a program, something like a FinEd program,” said Fonacier.

This program would be conducted based on an industry association, not on a per-bank basis, and might include various events in certain locations.

The FinEd Program already includes learning sessions and audio-visual materials prepared partly by universal and commercial banks, benefiting diverse groups like overseas Filipino workers, military personnel, students, agricultural workers, teachers, and entrepreneurs.

A report from McKinsey & Company revealed that Philippine digital banks rapidly grew their market value to $3 billion between January 2021 and January 2023, driven by deposits and e-payments.

However, lending growth has been slower, attributed to the recent initiation of operations for many of these banks.

The BSP anticipates releasing a report on digital banks soon.

“Some of them have started to gain traction, and some will be posting their loan income targets for 2024,” Fonacier noted.

She also mentioned the challenges in lending, emphasizing the need for a perfect credit score for clients and careful market study by digital banks.

Image by: Pixabay

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