THE chairman of the House Committee on Ways and Means on Monday filed a bill providing for the basic regulatory framework for virtual banking.
In filing House Bill 5913, Albay Rep. Jose S. Salceda said providing a regulatory framework for virtual banks should boost the financial inclusion thrust being pursued by the Bangko Sentral ng Pilipinas (BSP).
According to Salceda, “the existence of a financial system that is accessible to as wide a proportion of the population as possible is a prerequisite to building a strong middle class.”
Based on estimates, Salceda said the bill may increase the share of virtual-only banking assets to between 2.83 percent and 4.34 percent of the total assets of universal and commercial banks.
He added the proposal is expected to encourage the growth of virtual banking into a P903-billion industry.
“Virtual banking has become among the latest innovations in financial services,” Salceda said.
“Marrying widely accessible digital platforms, such as mobile phone applications, with conventional banking strategies, such as deposits and microlending, virtual banks are able to provide financial services at much more favorable rates, as they do not incur such expenses as establishing and securing branches and maintaining ATMs [automated teller machines].”
According to the lawmaker, there were around 30.4 million smartphone users in the Philippines as of 2017.
“Additionally, virtual banking, given its accessibility, presents opportunities for fast, reliable and less costly delivery of social cash transfers,” he said. “This would expedite the rollout of critical anti-poverty measures, and help achieve the country’s inclusive growth goals earlier.”
The bill provides a clear, coherent and far-sighted regulatory framework for virtual banks, while also granting adequate latitude to the BSP.
The measure also auctions license to qualified virtual banking applicants, to ensure that the state and the public receive the highest benefits from their applications.
The measure provides operations and management rules that levels the playing field to ensure that, right at the very start of this industry’s emergence, virtual banking can become a fair, sustainably developing and profitable industry.
The bill also opens the virtual banking sector to some degree of foreign ownership to ensure that the playing field is open to a wider set of candidates who can deliver more efficient outcomes for consumers, to attract some of the financial technology know-how already developed in other countries, and to ensure adequate capitalization of the industry.
It also outlines a framework for consumer protection in virtual banks, including deposit insurance and protection against unauthorized transactions.
By including consumer protection in the basic framework, the bill ensures that public welfare is an inseparable aspect of the exercise of the State’s supervisory power over the industry.
Additionally, the bill also provides a transition period for virtual banks already operating.