ALMOST all digital banks in the Philippines have yet to turn a profit with a moratorium on new licenses set to expire this year, Bangko Sentral ng Pilipinas (BSP) officials said.

"I don't think anyone is making money yet," BSP Governor Eli Remolona Jr. told reporters on Wednesday.

Bangko Sentral ng Pilipinas Governor Eli Remolona Jr. PHOTO FROM BSP

Central bank Director Melchor Plabasan said that of the country's six digital banks, just two appear to be profitable.

He did not identify which banks were already operating in the black but said "the expectation is that it would take around five to seven years before a digital bank becomes profitable."

"Globally right now, only five percent of digital banks are profitable," he added.

"So, we are expecting that there will be losses, but we don't expect that some will be out of the red already, probably even before the five to seven years."

The BSP, which issued guidelines on the establishment of digital banks in 2020, closed the window on new licenses less than a year later, saying that it wanted to monitor their performance and impact on the financial sector.

Only six licenses were granted, to UNO Digital Bank (UNObank), Tonik Digital Bank, UnionDigital Bank, Overseas Filipino Bank (OFBank), Maya Bank and GoTyme Bank.

UNO and Tonik are owned by Singapore-based firms. OFBank, meanwhile, is run by state-owned Land Bank of the Philippines. UnionDigital, Maya and GoTyme are respectively owned by Union Bank of the Philippines, the PLDT Group and the Gokongwei Group.

Representatives of the six were not immediately available for comment.

The moratorium on new licenses is scheduled to expire this August and Pablasan said a report on the sector would be submitted in April.

"[P]art of that report is a recommendation on whether to, let's say, is it going to be a partial lifting, is it complete lifting, or is it going to be an extension of the moratorium," he added.

Pablasan said that to date, the six digital banks had collectively amassed around 8.7 million in deposits or approximately 7 percent of the total accounts held by Philippine banks.

Remolona said that while interest in new digital bank licenses remained high, business models would still have to be tested locally.

Last year, he said that the BSP had established a regulatory "sandbox" to minimize risks from financial technology innovations.

"[I]n general, the more significant the innovation, the higher the degree of uncertainty about the regulatory implications for that innovation, especially if it's used by banks or will eventually be used by banks," Remolona said.