An entity intending to operate as a digital bank, which refers to a bank offering financial products and services that are processed end-to-end through a digital platform and/or electronic channels with no physical branch/sub-branch or branch-lite unit offering financial products or services, should obtain prior authority from the BSP. The minimum capitalisation of digital banks is PhP1 billion (approx. US$19,182,820). As set out in the regulations, a digital bank is subject to the prudential requirements set out by the BSP including corporate governance and risk management, particularly on information technology and cyber security, outsourcing, consumer protection and anti-money laundering and combating the financing of terrorism, as provided under existing regulations. A foreign individual or a foreign non-bank corporation is allowed to own up to 40% of the voting shares of a digital bank, while a qualified foreign bank may own up to 100% of a digital bank. Voting shares of stock of a Filipino individual or a Philippine non-bank corporation in a digital bank should likewise not exceed 40%. There are other applicable restrictions on ownership of voting shares of a digital bank.
Banks intending to offer electronic and payment services, which are products and/or services that enable consumers to carry out or initiate payments electronically, financial transactions and other related services through a point of interaction, should also obtain prior BSP approval.
Persons or entities intending to provide services in the Philippines would generally be considered doing business in this jurisdiction and therefore, must also register and obtain a primary license from the SEC. This entails submission of documentary requirements with the SEC depending on the corporate vehicle (subsidiary or branch) intended to be established.
Additional comments regarding the legal situation for online-banking services or what FinTech’s must be aware of in this business area
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Economic conditions
Market size for online-banking services and biggest companies in this business area
There is a big potential for online banking services to grow more in the Philippines. Based on the 2020 Financial Inclusion Initiatives Report prepared by the BSP, 69% of adults own a mobile phone, but only 12% of mobile phone users use it for financial transactions, and 53% of adults use the internet, although 9% of internet users use it for financial transactions. In a document titled BSP Digital Payments Transformation Roadmap 2020-2023 as prepared by the BSP, the objective of BSP is to convert 50% of the total volume of retail payments into digital form and expand the financially included to 70% of Filipino adults, by onboarding them to the formal financial system through the use of payment or transaction accounts.
There does not appear to be a publicly available list of banks in the Philippines which have been granted the authority to engage in electronic banking (e-banking services) by the BSP. However, based on BSP's website, there are only six banks which hold a digital bank license.