BSP pushes era of digital banking ecosystem

Banks looking to engage the Bangko Sentral ng Pilipinas to drive the mass adoption of digital banking should turn their attention to creating multilateral relationships needed to attract more borrowers and operate in a new open banking ecosystem.

Digital banks aim to provide convenient access to a wide range of financial services to the unbanked and underserved sectors, including payments, remittances and bank accounts, irrespective of location while promoting financial inclusion.

“That’s their call to us. They want to enter a partnership with the BSP to make the public aware of their specific bank category somehow,” BSP deputy governor Chuchi Fonacier told the Daily Tribune at the 2024 Annual Reception for the Banking Community held in Manila City on Friday.

Fonacier said the BSP and the Digital Bankers Association are still discussing ways to achieve this goal. The country has six digital banks: GoTyme, Maya Bank, Overseas Filipino Bank, Tonik Bank, UNO Digital Bank and UnionDigital Bank.

Fonacier said the central bank is considering a literacy program on digital banks similar to its 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,” Fonacier said.

“This one will be done based on an industry association, not on a per-bank basis,” she added.

The program may entail putting up events in certain places, Fonacier said.

Existing projects under the FinEd Program involve learning sessions conducted by the BSP and modules and audio-visual learning materials partly prepared by universal and commercial banks.

Their beneficiaries include overseas Filipino workers, personnel of the Armed Forces of the Philippines, Technical Education and Skills Development Authority students, agricultural workers, public school teachers and entrepreneurs.

According to a global business consultancy McKinsey & Company report, Philippine digital banks grew their market value quickly to $3 billion between January 2021 and January 2023, mainly due to deposits and e-payments.

“On the other hand, the growth in lending is not that fast because they just started their operations. Some only started in 2022 and the others in the early part of last year,” Fonacier said.

The BSP said it will release its 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 said.

“Lending is difficult because clients should have a perfect credit score. Digital banks are also still studying their target market carefully,” she added.

McKinsey & Company estimates a 30 percent growth in bankable Filipinos by 2030, driven by young professionals, entrepreneurs, technology enthusiasts, and households with overseas members working abroad.

Based on BSP’s data, remittances from overseas Filipinos average $30.5 billion annually. Meanwhile, there are at least 15 million informal entrepreneurs and self-employed workers in the Philippines, McKinsey & Company says.

With these big markets to tap, the global firm says Philippine digital banks can grow yearly revenues by over 10 percent.