THE Bangko Sentral ng Pilipinas (BSP) has lifted the moratorium on the establishment of digital banks.
In an advisory, the central bank’s Monetary Board has approved the lifting of the moratorium on the grant of new digital banking licenses starting Jan. 1, 2025, and allowed a maximum of 10 digital banks to operate in the country.
With this limit, BSP Gov. Eli Remolona Jr. said “They can closely monitor developments in the digital banking industry, obtain broader perspective as these banks mature further in their operations, as well as assess the impact of the entry of new players on the banking system.”
Since the issuance of the Digital Banking Framework in December 2020, six digital banks have been operating in the Philippines.
With this current move, the lifting of the moratorium will accommodate four additional licensees, coming from either new or converting banks.
“Applicants must bring something new to the table. We want to see unique product and service offerings that are different from that offered by the existing market players. These offerings should have significant potential to reach broader clientele, particularly the untapped or underserved market segments,” Remolona said.
The central bank chief said the BSP takes into consideration the digital banks’ financial soundness and achievement of the policy objectives of the Digital Banking Framework of promoting wider adoption and use of digital financial services in the country and expanding their reach into the unserved and underserved segments of society.
Tonik Bank now in Cebu
Meanwhile, Tonik Bank, the first digital-only neobank in the Philippines announced its expansion to Cebu, bringing its full suite of customer-centric and innovative products to the island.
The expansion, according to Greg Krasnov, Tonik chief executive officer and founder, underscores the bank’s vision to enhance financial inclusivity and provide accessible banking solutions to more Filipinos.
Krasnov said their aim is to connect with the 90 percent of the population who have never borrowed from banks or formal lending institutions.
“Our entry to Cebu is a critical step for us to expand in other areas in the Visayas and Mindanao,” said Krasnov.
“Our goal has always been to democratize banking and provide innovative solutions that cater to the everyday needs of Filipinos,” he stressed.
Along with its expansion to Cebu, Tonik introduced its Shop Installment Loan product, a new feature that enables customers to purchase their dream home appliances and gadgets with the lowest monthly payments.
The Shop Installment Loan will initially be available at select retailers, with plans to expand to more stores by the fourth quarter of 2024.
With Cebu being the second largest market for financial services in the country, Tonik’s entry is expected to push the bank’s growth and sustain the growth of Tonik’s Point of Sale (POS) network.
This year alone, the digital bank said it has grown its POS network by 5x, solidifying its position as top credit-led digital bank, and leader in consumer lending growth in the Philippines.
Promising future
Moreover, Krasnov sees a promising future for digital banking in the country, driven by the growing demand for easily accessible credit.
“Fintech is very good at using alternative data in granting loans,” he said. “We access many times of alternative data.”
He noted that digital banks use predictive analytics for credit assessment, enabling them to make instant credit decisions.
Predictive analytics allows digital banks to incorporate a wide range of data, including transactional history, social behavior, online activity, and even mobile phone usage patterns. This comprehensive data analysis provides a more accurate picture of a consumer’s financial behavior.
Using this tool, digital banks can also offer personalized loan products with terms that match the borrower’s risk profile.
Moreover, as the first holder of a digital bank license in the Philippines, Krasnov stressed that Tonik is closely regulated by the BSP, undergoing regular audits and compliance checks to ensure the safety of deposits.
“We are purely built in the cloud and don’t have any on-site servers, which allows us to create a different level of security for our products. We are pioneers in implementing numerous security mechanisms in our app and processes,” he said.
Moreover, the presence of digital banks helps reduce Filipinos’ reliance on loan sharks, commonly known as “5-6” lenders.
“This is a lot better. Five-six lenders will only lend you typically up to 30 days and lends at extreme high interest rates. Our interest rates are much much more affordable. We offer bank-level interest rates and we lend to a much longer period that enables you to take a larger amount of loan,” he said. / KOC