‘Branchless’ banking app needs special license, BSP says

The Bangko Sentral ng Pilipinas (BSP), considered as one of the most dynamic regulators in the monetary universe, requires banks to obtain a special license for the use of an app that allows them to branch out at the fraction of the cost of a bricks and mortar branch.

This was learned from the app developer whose backers include the SBI Group headquartered in Tokyo and the Dutch development bank FMO.

The product requiring a special license is called Bank-Genie, one that allows lenders to branch out anywhere at the cost of a $200 tablet, a $40 card reader and a $60 printer, tops.

This compares with bricks and mortar branches that typically cost in excess of P10 million per branch, based on information obtained from private banks. Such upfront costs also typically take five years to recover and only then do those branches begin to make money for shareholders, the bankers said.

Already, the developer headquartered in Singapore is in the advanced stages of negotiation with some of the largest universal and commercial lenders in the country, although its founder and CEO, Ramkumar Sarma, would rather that thrift and rural lenders get the app for themselves and give the big banks a run for their money.

Sarma said banks everywhere have to contend with accelerating competition coming from the financial-technology (fintech) sector that in the Philippines is represented by the telecommunications firms offering so-called electronic wallets, such as G Cash by Globe Telecom and Smart Money by Smart Communications.

Even ride-sharing firms Grab and Uber allow patrons to top up their e-wallets that some in the financial sector claim is an activity technically a deposit-taking activity that needs a license from the BSP.

But Sarma said the whole point to offering the banks the app is consistent with the financial-inclusion advocacy for which the BSP is known and supports in full. Sarma himself comes from India where small traders and craftsmen without bank accounts take out a loan of 5 rupees in the morning and pay back with six rupees by day’s end.

He said he had been shown data showing 67 percent of Filipinos without bank accounts, effectively barred access to the formal financial system that helps perpetuate their state of penury.

“These people need to be brought in. If excluded, they will remain poor,” Sarma said.

BSP Deputy Governor Diwa C. Guinigundo said banks intending to use the app need to have a license that could prove temporary to ensure against fly-by-night developers and to protect the interest of the banking public against such issues as fraud and security of transactions, among others.

“That’s the essence of the regulatory sandbox,” he said by a text message.

He would not disclose which local banks have taken interest in the product that may be paid for with a one-time fee or alternately, one in which there is no upfront cost but the app developer gets a fraction of the cost of each transaction.

Sarma said Bank-Genie was first introduced in Africa, where millions do not have access to the formal financial services and whose requirements fall far below the minimum dispensed by regular lenders.

“After our study, it became apparent that the Philippines is the right location for our [proposed] global customer support center for our growing client base. It offers a number of considerable advantages, such as the availability of well-trained and hard working talent,” he said.

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