The Philippine central bank on Thursday said it will stop accepting digital bank license applications next month and will cap the number of players to seven for now.
The move will allow regulators to monitor the performance of the new players aiming to challenge the country’s traditional lenders, central bank governor Benjamin Diokno said.
The new category, introduced late last year for online-only banks, has attracted interest from so-called neobanks backed by foreign investors as well as from traditional banks pivoting to digital services.
Applicants see a large potential market in a country where around 70% of the population does not have a bank account and where the use of fintech platforms grew explosively during the pandemic.
With five licenses already issued, and two applications being processed, the window for new applications is in effect closed.
“If you submit an application at this time—because we made it clear that it’s on a first come, first served basis—your chances of getting in are very slim,” Diokno said.
The five license holders are: state-backed Overseas Filipino Bank; neobanks Tonik and UNO Bank; Union Digital Bank, an arm of Union Bank of the Philippines; and GOtyme, a partnership between Singapore-headquartered fintech Tyme and Gokongwei Group, a Philippine conglomerate.
Read more: This neobank targets the young and unbanked population in the Philippines
The central bank did not disclose the two pending applications, but KKR-backed mobile wallet Paymaya in June said it had filed an application. Local private lenders Rizal Commercial Banking and Philippine National Bank were also eyeing a license.
“The closure of the application window will allow the [central bank] to monitor the performance and impact of digital banks on the banking system and their contribution to the financial inclusion agenda,” Diokno said.
“We need to ensure that the business environment continues to allow healthy competition among banks enabling them to offer innovative and competitive financial products and services to their clients,” he added.
The freeze will be reviewed after three years.
“If there is a need for lifting the limit, we will do so,” Diokno said. “But if in our judgment seven is enough, then there will be no additional digital bank in the future.”
This article first appeared on Nikkei Asia. It’s republished here as part of 36Kr’s ongoing partnership with Nikkei.