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The Bangko Sentral ng Pilipinas (BSP) has issued Certificates of Authority (COA) to Operate to two additional banks, allowing them to proceed with full operations as digital banks. This has resulted in a total of six digital banks allowed to operate in the Philippines.
The most recent recipients were UnionDigital Bank, Inc. (UDB) and GoTyme Bank Corporation (GTYME), which obtained their certificates last July 12 and 29, respectively. In the first quarter of 2022, the BSP authorised Tonik Digital Bank, Inc. (TONDB) and Maya Bank, Inc. (MAYA) to operate as digital banks, while Overseas Filipino Bank, Inc., a digital bank of LANDBANK (OFBDB), and UNObank, Inc. (UBI) were authorised during the second quarter of 2022.
The BSP issues the COA to Operate to digital banks that have substantially complied with the BSP’s conditions for approval and pre-operating requirements. These include capitalisation, risk and governance structure, and information technology systems, among others. The process for securing a COA to Operate begins with the application to establish a digital bank, to be approved by the Monetary Board (MB). Once approved by the MB, the BSP issues a COA to Register, to be submitted to the Securities and Exchange Commission. After registration and completion of all other requirements, digital banks may then obtain the COA to Operate from the BSP.
OFBDB, TONDB, and MAYA are now fully operational, while UBI, UDB, and GTYME have commenced limited operations targeting select customers. Operating initially under limited capacity is a conservative approach adopted by digital banks to further ensure that all aspects of their digital operations are ironed out prior to fully launching their services to the public. UBI, UDB and GTYME are expected to publicly launch within the second half of this year.
Digital banks, unlike brick-and-mortar banks, have no physical branches. Their financial products and services are processed end-to-end through digital platforms or electronic channels.
From January to June 2022, the volume and value of electronic payments and financial services processed through digital banks reached 1.4 million transactions and P8.45 billion, respectively.
The operations of digital banks support the BSP’s Digital Payments Transformation Roadmap, which aims to digitalise half of the total volume of retail payments in the country, and onboard at least 70 per cent of Filipino adults into the formal financial system by 2023.
Francis BignellFrancis is a journalist and our lead LatAm correspondent, with a BA in Classical Civilization, he has a specialist interest in North and South America.
As an expert deeply immersed in the financial and technological landscape, particularly within the context of Asia's evolving banking sector, I bring forth a wealth of knowledge to dissect the recent developments highlighted in the article by Francis Bignell. My comprehensive understanding of the intricacies surrounding digital banking, regulatory processes, and the broader financial technology domain positions me well to elucidate the nuances embedded in the discourse.
The article revolves around the Bangko Sentral ng Pilipinas (BSP) issuing Certificates of Authority (COA) to Operate to two additional banks, UnionDigital Bank, Inc. (UDB), and GoTyme Bank Corporation (GTYME), thereby expanding the cadre of digital banks in the Philippines to a total of six. My expertise allows me to dissect the key concepts embedded in this narrative:
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Certificates of Authority (COA) to Operate: These certificates signify the approval granted by the BSP to digital banks that have met the stipulated conditions, encompassing aspects such as capitalization, risk management, governance structure, and information technology systems.
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Digital Banks in the Philippines: The six digital banks mentioned - Tonik Digital Bank, Inc. (TONDB), Maya Bank, Inc. (MAYA), Overseas Filipino Bank, Inc. (OFBDB), UNObank, Inc. (UBI), UnionDigital Bank, Inc. (UDB), and GoTyme Bank Corporation (GTYME) - showcase the burgeoning trend of digital banking in the Philippines.
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Operational Phases: The article outlines the progressive phases that digital banks undergo, from obtaining the COA to Operate to commencing limited operations and eventually transitioning to full-scale public services. This phased approach ensures meticulous preparation and risk mitigation before a full-scale public launch.
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Digital Banking Operations: Digital banks, in contrast to traditional brick-and-mortar banks, operate exclusively through digital platforms or electronic channels. This characteristic fundamentally transforms the way financial products and services are offered and accessed.
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Performance Metrics: The article provides insights into the performance metrics of digital banks, citing statistics such as the volume and value of electronic payments and financial services processed during the first half of 2022. This data, 1.4 million transactions and P8.45 billion, underscores the increasing adoption and usage of digital banking services.
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Regulatory Framework: The role of the BSP in regulating digital banks is highlighted, emphasizing the importance of compliance with regulatory conditions and the approval process overseen by the Monetary Board (MB).
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Strategic Goals: The operations of digital banks align with the BSP's Digital Payments Transformation Roadmap, focusing on the digitalization of retail payments and the inclusion of 70% of Filipino adults into the formal financial system by 2023.
In conclusion, my expertise provides a robust foundation to appreciate the nuances of the evolving digital banking landscape in the Philippines, allowing for a comprehensive understanding of the regulatory frameworks, operational dynamics, and strategic goals shaping this transformative trend.
