Two Singapore-headquartered fintech companies have received approval from the Philippines’ Bangko Sentral ng Pilipinas (BSP) to operate digital banks in the country.
One of the digital banks said that they are aiming to help bridge the financial inclusion gap in the Philippines and eventually Southeast and South Asia. The BSP’s vision and foresight to digitise the local banking industry is future-forward and apt because ultimately it will help align the Philippines as a modern banking centre for the region said the digital bank’s top executive.
The other digital bank, on the other hand, recently secured over US$ 20 million in retail deposits in under one month and said to be a historic record for any new bank launching in the Philippines. The bank stated that securing a digital banking license is one of this year’s anticipated milestones for them.
In December 2019, the digital bank said it received its initial rural bank license from the BSP, allowing the “Neobank” to provide retail banking services focused on retail deposits, card payments and consumer loans. A year later, the BSP issued Circular No. 1105 on The Guidelines on the Establishment of Digital Banks, clearing the way for the digital bank to scale up and apply for a formal digital bank license.
“Neobank” is the global term for digital-only banks, which offer the same services as traditional banks but without the need for physical branches. “Neobanks” can cut fees and offer better interest rates because of the savings they incur for not having physical branches.
An official digital bank license from the country’s central bank will enable these digital banks to offer more products and services to narrow the gap between the banked population and the huge, underserved segment in the Philippines. As more digital-based solutions develop in the market, Filipinos are more open to innovations that make payments and banking more convenient, accessible and seamless.
As reported by OpenGov Asia, new research from a global digital payment firm has found that over 8 in 10 Filipinos (83%) are aware and interested (81%) in using digital banking services. However, only 32% of respondents are currently using services offered by a digital bank.
Top interest drivers for Filipinos to use digital banking services include access to banking services any time of the day (68%), time saved from not having to queue at bank branches (68%) and convenience (67%). The study also showed that Filipinos are most keen to work with a financial services brand for digital banking services (93%) and traditional banks (92%), followed by new start-ups with digital banking services (72%). Filipinos interested in banking with digital banks are keen to use services such as paying bills (84%), transferring money locally (78%), making deposits and withdrawals (76%), and making payments for purchases at local retail locations (71%). However, the preference of using digital banking for traditional bank services such as investments (52%), international transfers (48%) and loans (46%) is lower.
In addition, 86% of Filipino respondents would switch current banking services to digital banking services if the bank provided better rewards and 85% would do so if they can benefit from lower costs for their banking transactions. Filipinos’ interest to use digital banking services increased to 80% compared to 70% in the previous year when the same research was conducted.
There is an opportunity in the Philippines for traditional banks and new players to launch digital banking services in the country that will better serve the needs of underserved and underpenetrated segments, said the digital payment giant. They believe this will transform the banking and payments landscape in the country and they are keen to work with all their partners to help them create a better user interface and experience when they create and enhance their digital banking solutions.