BSP approves OFBank's digital banking license

BSP approves OFBank's digital banking license

MANILA, Philippines — The Overseas Filipino Bank (OFBank), a wholly owned subsidiary of the Land Bank of the Philippines (Landbank), has officially become the first branchless, digital-only bank in the country after securing a license from the Bangko Sentral ng Pilipinas (BSP).

The BSP issued OFBank’s digital banking license on March 25. Prior to that, it was able to commence its banking operations in June last year using its then existing thrift bank license.

OFBank was created under Executive Order (EO) 44, signed by President Duterte in September 2017, for the establishment of a policy bank dedicated to providing financial products and services tailored to the needs of Filipino workers overseas.

“This milestone in the country’s banking history not only fulfills President Duterte’s campaign pledge to create a bank that caters to overseas Filipinos, but will also help the Philippines leapfrog to the digital economy,” Finance Secretary Carlos Dominguez said.

In June last year, the OFBank was launched virtually as the country’s first branchless and digital-centric government bank.

While fine-tuning its operations, systems and processes to enable its official transition into a digital bank, the OFBank operated as a thrift bank.

In December 2020, the BSP issued a circular containing the guidelines on the establishment of digital banks, clearing the way for the OFBank to apply for a license as a digital bank.

The bank currently offers four digital products and services that include a digital onboarding system with artificial intelligence (DOBSAI), which allows the real-time opening of a mobile banking deposit account on supported iPhone or Android devices.

Aside from deposit savings accounts, the OFBank’s digital services also includes fund transfers, bills payments and applications for multi-purpose loans.

OFBank’s global digital reach spans 112 countries, with its clients able to access online the services of 763 merchants onboarded in its mobile application via the LinkBiz.Portal.

Meanwhile, two groups have also filed their respective applications for a digital bank license as the BSP ramps up efforts to shift to a cash-lite from cash-heavy economy.

BSP Deputy Governor Chuchi Fonacier said the BSP is also evaluating the applications of two groups since it issued the guidelines on the establishment of digital banks.

A digital bank offers financial products and services that are processed end-to-end through a digital platform with no physical branch offering financial products and services.

According to the BSP, digital banks must have a minimum capitalization of P1 billion.

Fonacier said the applicants include a foreign digital bank in partnership with a local company and a foreign company in partnership with a local investor.

BSP Governor Benjamin Diokno has said digital banks could help address the frequently cited constraints in delivering financial services to the unbanked and underserved sectors.

“The Monetary Board may limit the total number of digital banks that may be established, taking into account the total number of applications received and the assessment of the overall banking situation,” Diokno said.

Digital banks are subject to the prudential requirements of the BSP, including corporate governance and risk management, particularly on information technology and cybersecurity, outsourcing, consumer protection and anti-money laundering and combating the financing of terrorism.

The new players are required to maintain a head office in the Philippines to serve as the main point of contact for stakeholders and regulators.

Digital banks may  grant loans; accept savings, time deposits, and foreign currency deposits; invest in bonds and other debt securities, commercial papers and accounts receivables, drafts, bills of exchange or notes arising from a commercial transaction; issue credit cards; buy and sell foreign exchange; issue electronic money products; and sell and service microinsurance products. – Lawrence Agcaoili