Digital banking spurs financial inclusion in Philippines

MANILA, Philippines — The establishment of digital banks in the country is expected to boost the government’s financial inclusion objectives, according to the Bangko Sentral ng Pilipinas (BSP).

In a webinar organized by the Management Association of the Philippines, BSP Governor Benjamin Diokno said the establishment of a digital banking framework is particularly relevant as billions of people affected by the   pandemic are driving a historic and dramatic shift in consumer behavior.

Diokno said digital banks in the country could advance financial inclusion by providing affordable financial services to the mass market and at the same time usher prosperity and alleviate poverty.

“With the issuance of Digital Banking Framework, the Philippines is a step closer to reaching its strategic outcomes. On our end, the BSP has long recognized the role of digital platforms in finding greater efficiency in the delivery of financial products and services,” he said.

The BSP chief said the issuance of the framework is an integral building block in promoting an enabling regulatory environment that fosters responsible innovation, promotes cyber resilience and contributes to advancing the digitalization of the financial sector.

The   Monetary Board has granted digital licenses to six entities : Overseas Filipino Bank, Tonik Digital Bank, UNObank Inc., Union Digital Bank, GoTyme Bank   and Maya Bank.

The BSP decided to close the application window for new digital banks last Aug. 31 and limited the number of players to seven to closely monitor the industry’s performance and contribution to the country’s financial inclusion goals as well as impact on the banking system.

Diokno said the unique challenges under the new banking include data privacy concerns, money laundering and electronic frauds.

He urged members of the MAP, particularly stakeholders and financial institutions to adopt adequate measures and controls to manage the risks and conduct effective information campaign to educate customers.

“Along with this great reset is the rise of challenger banks that can change the game on how the brick-and-mortar banks deliver their products and services.

Intuitively, these digital banks can be viewed by traditional banks as formidable contenders which can reduce their market share,” Diokno said.