Electronic money issuer converting to digital bank

An electronic money issuer (EMI) is one of two applicant banks that the central bank is still processing to complete the seven-bank limit on the issuance of a digital bank license.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Chuchi G. Fonacier said on Monday that they have yet to complete their review of the last two digital bank applicants after they closed the window for the digital bank category last Tuesday, August 31.

The BSP will not accept new applicants for neobank license until end-December 2024.

“Not yet approved,” said Fonacier. “(Applications are) still being processed.”

The BSP is currently checking all requirements and documents of the two applicants, of which one is an existing bank converting into a digital bank. “The other one is an EMI establishing a digital bank,” said Fonacier.

There are currently 29 registered EMI banks with the BSP and 33 nonbank financial institutions that are licensed EMIs.

The list of EMI banks include the country’s biggest bank, BDO Unibank Inc. Other EMI banks are Metropolitan Bank and Trust Co., Philippine National Bank (PNB) and Rizal Commercial Banking Corp. (RCBC).

Both PNB and RCBC are interested in acquiring digital bank license, while the other banks, especially Bank of the Philippine Islands which is also an EMI bank, have repeatedly expressed their disinterest to have an official digital bank unit.

EMI banks such as Land Bank of the Philippines, Union Bank of the Philippines and Robinsons Bank Corp. already have digital bank units with separate digital bank licenses. These banks were the first five applicants to secure a digital bank license before August 31, plus two banks from Singapore.

Non-bank EMIs are PayMaya Philippines, G-Xchange Inc. (GCash), GPay Network Inc. (GrabPay), Easypay Global EMI Corp. and Omnipay Inc., among others.

Any existing banks applying to shift to digital banking, once approved by the BSP, are given three years to complete conversions including the closure of branches or branch lite units.

The BSP limited the number of digital banks to just seven and closed the window for digital bank license application for three years to enable them to closely monitor and develop expertise in the supervision of digital banks.

BSP Governor Benjamin E. Diokno said however that they will lift the moratorium on digital bank license applications if they have assessed a need for additional digital banks. But for now, seven is enough digital banks for the Philippine market, he said.

The five digital bank licenses were granted to: Overseas Filipino Bank of Landbank; Tonik Bank of Singapore; UNObank of Singapore; UnionDigital of UnionBank: and GOtyme of Robinsons Bank.

Digital banks are only required a minimum ₱1 billion capitalization. They have minimal or zero-reliance on physical touchpoints but it will have to set up one office as central hub in the Philippines to receive and resolve customer complaints.

Credit watcher Fitch Ratings said the BSP’s decision to cap the number of digital banks will “insulate” conventional or regular banks from “formidable competitors” that have “an edge” such as a large existing user base to reduce customer acquisition costs and “deep pocketed shareholders that can sustain heavy capital investments during the break-even period”.

Malaysia and Singapore have also limited the number of their own digital banks to just four and five, respectively.