MANILA -- The Philippine central bank on Thursday said it will allow the establishment of online-only banks in a move aimed at further expanding digital financial services, which have grown explosively across Southeast Asia amid the pandemic.
Bangko Sentral ng Pilipinas, or BSP, created a new license category for "digital banks," defined as those that offer "financial products and services that are processed end-to-end through a digital platform and/or electronic channels with no physical branches."
Scrapping requirements for physical branches is expected to open the banking sector to new players.
Under draft rules, digital banks will be required to have a minimum capitalization of 1 billion pesos ($20 million). They will be able to offer traditional banking services as well as more innovative services subject to regulatory approval. However, they will not be allowed to establish physical branches, and they must maintain a head office in the Philippines.
BSP Gov. Benjamin Diokno said the introduction of a digital banking framework will help advance financial inclusion in the country where only roughly 30% of the population have bank accounts.
"We see these banks as additional partners in further promoting market efficiencies and expanding access of Filipinos to a broad range of financial services, bringing us closer to the realization of our target that at least 50% of total retail payment transactions have shifted to digital, and 70% of adult Filipinos have transaction accounts by year 2023," Diokno said. "This is seen to remove sticky points and leapfrog our financial inclusiveness agenda."
Applications for the new licenses are now being accepted, Diokno told Nikkei Asia.
Regulators may choose to limit the number of digital banks that are established, depending on the number of applications and the condition of the banking sector in the country.
"Essentially, the BSP is looking to attract players with a strong value proposition, sufficient financial strength, technical expertise of management and effective risk management," Diokno said.
The Philippines' move comes as countries across Southeast Asia are embracing online-only banks.
Singapore's central bank is expected to award licenses to non-banks by the end of the year. Bidding for the licenses drew attention from both Singaporean and foreign startups, including local players Grab and Sea, as well as Chinese fintech Ant Group.
In Vietnam, the country's first digital bank relaunched in September to tap COVID-fueled demand for cashless transactions.