GCASH is “hesitant” about applying for a digital banking license as the Bangko Sentral ng Pilipinas’ (BSP) regulatory requirements could limit its operations, the top official of G-Xchange, Inc., the e-wallet’s operator, said.
“Truthfully, you’ll get slower as an e-wallet if you get a banking license. Because of all the requirements governance-wise from a regulatory standpoint that they will look at for a bank or a digital bank, a lot of time will be consumed on that rather than growing the market and serving the consumer. So, our focus will be divided. And that’s the reason why we’re hesitant,” G-Xchange President and Chief Executive Officer Oscar Enrico A. Reyes, Jr. told reporters on Tuesday.
G-Xchange handles the mobile wallet operations of GCash. The parent firm of GCash, Globe Fintech Innovations, Inc. or Mynt, is an affiliate of Ayala-led telecommunications company Globe Telecom, Inc.
Bloomberg reported last week that applying for a digital banking license for GCash “is being discussed, although nothing is definite as of the moment,” according to Globe Fintech Innovations CEO Martha Sazon.
GCash currently holds electronic money issuer (EMI) and remittance agent licenses from the BSP. It is classified as an EMI-Non-Bank Financial Institution.
“The moment you get a license, there are so many things that BSP requires you to do. There are more governance measures that you have to take… There are more requirements in terms of financial health, et cetera. And that’s why for us, it will slow us down,” Mr. Reyes added.
EMIs are only allowed to offer e-money issuance and related services, while digital banks can offer a full suite of banking services.
Under the BSP’s regulations, EMIs with monthly outstanding e-money balance of at least P100 million are required to maintain liquid assets in trust accounts equivalent to at least 50% of their outstanding e-money balance and to cover the remaining balance with placements in bank deposits, government securities, or other liquid assets acceptable to the BSP.
EMIs with large-scale operations, or those with a 12-month average value of aggregated inflow and outflow transactions equal to or greater than P25 billion, are required to maintain minimum capital of P200 million, while the minimum capital requirement for small-scale EMIs is P100 million.
Meanwhile, digital banks are required to have a minimum capitalization of P1 billion. Digital banks are also subject to the same prudential, governance, risk management compliance, audit and reporting standards that are applicable to other bank categories.
Mr. Reyes added that acquiring a digital banking license could affect its existing partnerships with online lenders or neobanks like UNO Digital Bank and CIMB Bank PH.
“If we suddenly say that we want [a digital banking license], I think they might view it as competitive to their own offer. It might discourage them from working closely with us. That’s a big consideration for us to say that maybe we do not need a license yet,” he said. “We’re helping them grow their business. So, I think it’s a partnership that we don’t intend to sever. I think it’s something that we intend to nurture.”
He said GCash is presently already able to offer loans and savings products, which are part of a bank’s core businesses.
“If you want to go for digital banking or banking in general, the business model of banking is most primarily on the lending side. But we’re already able to offer lending without the requirements and the governance that you would need to operate a bank,” Mr. Reyes added.
The BSP recently approved the lifting of a moratorium on the grant of new digital banking licenses starting January next year, opening four new slots. In 2021, the central bank capped the number of digital banks at six.
The six online lenders operating in the country are Tonik Digital Bank, Inc.; GoTyme Bank of the Gokongwei group and Singapore-based Tyme; Maya Bank of Voyager Innovations, Inc.; Overseas Filipino Bank, a subsidiary of Land Bank of the Philippines; UNObank of DigibankASIA Pte. Ltd.; and UnionDigital Bank of Union Bank of the Philippines, Inc. — A.M.C. Sy
