The Philippine central bank will close the application window for digital banking licenses for three years and limit the number of digital banks to seven in the meantime, Bloomberg reported.

Bangko Sentral ng Pilipinas (BSP) will close the application window for three years to allow the regulator “to better monitor” the performance of the industry, said Governor Benjamin Diokno said in a briefing on Thursday.

In a statement on Thursday, the central bank said the Monetary Board decided to close the window for the submission of applications from new digital banks, including converting banks, starting August​ 31, 2021. This is in line with the overall thrust of maintaining a stable and competitive environment for banks.

“The closure of the application window will allow the BSP to monitor the performance and impact of digital banks on the banking system and their contribution to the financial inclusion agenda,” Diokno said in the statement. “We need to ensure that the business environment continues to allow healthy competition among banks enabling them to offer innovative and competitive financial products and services to their clients.”

Digital bank applications that are received by the BSP until August 31, 2021 will be processed on a first-come, first-served basis and will be assessed for completeness and sufficiency of documentation/information as well as compliance with the licensing criteria on the establishment of digital banks, the central bank said.

Applicants that are able to submit the complete documentation on or before the said closure date will be processed by the BSP.

The applications received on or before August 31, 2021 with noted documentary deficiencies or which do not meet the BSP’s pre-qualification criteria will be returned and will not be subject to further processing. The organizers will be informed that their applications will be deemed closed. After August 31, the BSP will no longer entertain nor accept new or returned applications, the regulator said.

To date, the Monetary Board has already approved the application of five digital banks, including two incumbent banks which have converted their existing licenses to a digital bank license. These include UNObank, UnionDigital Bank, and GoTyme. While Overseas Filipino Bank Inc. and Tonik Bank are banks that converted their existing license to digital banks.

The Monetary Board approval corresponds to the first of the three-stage licensing process. Meanwhile, the BSP is currently processing two other digital bank applications, according to the statement.

“As these tech-savvy, customer-centric players introduce innovations in the banking sector, we are confident that the BSP is on track to achieving its digitalization and financial inclusion goals,” Diokno explained.

Central banks across Asia including Singapore, Hong Kong, and Malaysia are opening up the banking industry to digital players, encouraged by higher smartphone penetration and better internet connections. Malaysia central bank plans to issue up to five licenses in the first quarter of 2022. Singapore granted four firms, including tech companies Grab, Ant Group, Sea Ltd, licenses to run digital banks in the city-state in December last year.

Demand for online banking services has also accelerated by the ongoing COVID-19 pandemic. In the Philippines, several banks want to secure digital banking licenses as the pandemic accelerated a shift to online transactions.

Featured image credits: Bangko Sentral ng Pilipinas

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