BSP Deputy Governor Chuchi G. Fonacier stated that fintech startups, including digital banks, often face losses in their initial years due to significant pre-operating and establishment expenses. She explained that startups in the Philippines, like most digital banks, will be at a loss and not achieve positive net results for five to seven years.
Preliminary BSP data reveals a PHP 7.07 billion net loss for the digital banking sector as of December 2024, continuing a trend since March 2023. These losses are attributed to substantial investments in technology, personnel, and customer acquisition.
Additionally, the industry’s loan-to-deposit ratio remains low at 36%, indicating challenges in expanding lending operations.
Chuchi G. Fonacier
“There are difficulties in securing high-quality loans due to the limited financial data or credit history of their target market,” Fonacier noted.
While deposits have surged by 34.1% to PHP 87.39 billion as of September 2024, loan growth has been sluggish, increasing by only 1.2% to PHP 29.78 billion.
“In addition, retaining customers over a long term can also be a challenge given that the market still has low switching barriers,” Fonacier added.
To improve their prospects, digital banks must enhance their credit scoring models, accelerate credit product deployment, and demonstrate their role in expanding financial access for underserved communities.
Despite these challenges, the BSP remains optimistic about the sector’s potential to deepen financial inclusion and drive digital transformation.
Fonacier emphasised that digital banks also need to strengthen governance, particularly oversight practices across business functions to properly direct the business operations towards achieving business goals and eventual profitability.
The BSP aims to onboard at least 70% of adult Filipinos into the formal financial system.
