OWN BANK, The Rural Bank of Cavite City, Inc. (OwnBank) is planning to apply for a commercial banking license as it looks to expand its product offerings.

“So, [the central bank] was actually telling us to apply for a digital bank license. We thought that whatever a digital bank can do, we can also do. So, we upped the ante. Actually, I was hired here for it to be converted as a commercial bank,” OwnBank President and Chief Executive Officer Jose Mari S. Cagurangan said at a briefing last month.

OwnBank is currently operating as an online-centric bank, offering its products and services via its digital banking platform.

As of the first quarter, OwnBank was the sixth largest rural and cooperative bank in terms of assets with P9.64 billion, data from the Bangko Sentral ng Pilipinas (BSP) showed.

It was also the fifth largest in terms of deposit liabilities at P8.48 billion and the 14^th largest in terms of loans at P2.45 billion.

Mr. Cagurangan said the lender expects to end the year with P2.1 billion in capital from just P100 million when it began operations in October 2023.

He said the bank’s growth has been boosted by its expanding customer base as its offer of zero cross-border fees and zero currency charges for transactions have attracted not only overseas Filipino workers but also the younger clients.

The bank is also employing an embedded finance strategy, partnering with Lazada PayLater and TikTok PayLater to offer microloans.

Mr. Cagurangan said customers have been able to repay their loans as the bank has zero nonperforming loans, adding that this was supported by their artificial intelligence-backed credit scoring model.

The BSP has been closely monitoring entities operating like a digital bank or those that have a digital-centric or neobank model, even approaching some players to apply for the appropriate license after the three-year moratorium on the grant of digital banking licenses was lifted at the start of this year.

Earlier this week, it issued a draft circular that seeks to set tiered prudential requirements, including capital and leverage requirements, for digital-centric thrift, rural and cooperative banks.

The BSP defines a digital bank as an institution that offers financial products and services that are processed end-to-end through a digital platform or electronic channels with no physical branch.

Meanwhile, neobanks offer banking services via online platforms and electronic channels. Existing thrift, rural, and cooperative banks that primarily offer financial products and services processed via digital channels can do so under an Advanced Electronic Payments and Financial Services license. — A.M.C. Sy