A European firm has started undergoing the application process for a digital bank license in the country, Bangko Sentral ng Pilipinas (BSP) Deputy Governor of Financial Supervision Chuchi Fonacier said.

She said the applicant has been operating as a digital bank outside the Philippines and aims to provide underbanked Filipinos loans using non-traditional data as their proof of financial capacity to repay.

"Artificial intelligence also has a role. But they have this solution where you can easily gather information like credit data and financial transactions," Fonacier told the media last Tuesday during the relaunch of the BSP's Protect Your Money Campaign.

"The source may not be necessarily a bank but others that provide information on your online purchases or other personal transactions," she added.

Fonacier refused to disclose further details about the European firm as it is still undergoing the initial phase of the entire application process.

BSP opened the application period for up to four more digital banks in the country on 1 January 2025.

BSP Governor Eli Remolona Jr. stressed that the new digital banks must present unique business models, resources, and products that will be accessible to underserved Filipinos, including small enterprises.  

However, Remolona said qualified applicants can also be traditional banks that are converting to digital banks.

BSP opened the application period for digital bank licenses on 1 January 2025.

In February, Fonacier said several firms expressed interest in obtaining the license but only two offshore firms were "very much interested."

While deposits of six existing digital banks in the country have been growing, Fonacier said their loan portfolios have yet to expand substantially. She stressed only two of them posted notable loan growth.

However, Fonacier said the Philippines has signaled higher demand for digital loans amid Filipinos' strong adoption of digital services and consumption of goods and services.

BSP Deputy Governor Mamerto Tangonan reported the country's digital transactions accounted for 52.8 percent of all monthly retail payments in 2023, exceeding the BSP target of 50 percent for the period. The total transaction value reached P6.1 trillion.

"The others are on their way and that's understandable because you're still establishing your presence among them," she said.

"But at least, we're seeing that it's really good. The prospects in the Philippines that we're seeing are better compared to the other jurisdictions that have six players," Fonacier continued.

BSP temporarily closed the application for more digital banks on 31 August 2021 after authorizing six digital banks to operate.

They include Singapore-based Tonik Digital Bank Inc., UnionDigital Bank Inc. of Union Bank of the Philippines (UnionBank), and GoTyme Bank Corporation of Gokongwei Group of Companies. The others are Maya Bank Inc. of the Manny Pangilinan Group of Companies, UNO Digital Bank Inc., and Overseas Filipino Bank which is a subsidiary of government-owned Land Bank of the Philippines.

"The BSP can closely monitor developments in the digital banking industry and obtain a broader perspective as these banks mature further in their operations," Remolona said.