MONETARY authorities have lifted a moratorium on new digital banking licenses, making four additional slots available and allowing up to 10 digital banks to operate in the country.

The moratorium will expire on January 1 next year, the Bangko Sentral ng Pilipinas (BSP) said.

Rules governing the establishment of digital banks were issued in 2020 and six licenses were subsequently issued. The BSP stopped accepting applications less than a year later, saying it wanted to monitor the impact of digital banks on the overall financial sector.

The six digital banks currently operating in the Philippines are 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, while OFBank is managed by the state-owned Land Bank of the Philippines. UnionDigital, Maya and GoTyme are owned by Union Bank of the Philippines, the PLDT Group and the Gokongwei Group, respectively.

The four additional licensees will either be new or converting banks, the BSP said.

"With this limit, the BSP 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," central bank Governor Eli Remolona Jr. said.

Applicants will undergo a "rigorous licensing process that will look into their value proposition, business models and resources capabilities," the BSP said.

This will be in addition to standard criteria that includes transparency of ownership, suitability of shareholders, fitness of directors and senior management, adequate capital, and a sound strategic and operating plan with proper corporate governance and risk management.

"Only digital bank applicants that have demonstrated capacity to meet the minimum criteria and offer unique value proposition, or develop new and innovative business models that are currently not offered or accessed by existing players, will be granted a digital banking license," the BSP said.

Applicants must also demonstrate a capability and readiness to deploy their digital solutions and sustainably grow their business.

They must "bring something new to the table," Remolona said.

"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," he added.

The decision to lift the moratorium, Remolona said, was based on an assessment of the existing digital banks' operations.

Their financial soundness and success in meeting the Digital Banking Framework's goals, which include promoting the use of digital financial services and reaching unserved and underserved communities, were said to have been considered.

The BSP chief has previously said that just two of the six digital banks appeared to be in the black and that it would take five to seven years for a digital bank to achieve profitability.

In a separate statement, the Digital Bank Association of the Philippines said it was "resolute in its mission of expanding financial inclusion and fostering innovation within the banking sector."

"We are committed to collaborating with the BSP in fostering an inclusive and resilient financial ecosystem," it added.

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