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BSP Issues Regulation Enabling Banks to Expand Service Delivery Channels

01.18.2017

In line with the thrust of the Bangko Sentral ng Pilipinas to create an enabling regulatory environment for innovations and allow banks to exponentially expand reach and serve clients more efficiently, the Monetary Board recently approved the guidelines for new bank service channels and relaxed existing regulations on deposit taking activities outside bank premises. 

Under the new regulations, banks are now allowed, with prior BSP authorization, to serve clients through cash agents contracted by banks to accept and disburse cash in its behalf, facilitating online self-service deposits, withdrawals and fund transfers, as well as bills payment.  Cash agents can also perform Know-Your-Customer procedures as well as collect and forward application documents for loan and account opening.  They may also sell and service insurance as may be authorized by the Insurance Commission.  These cash agents are typically cash rich third party entities with many outlets that conduct regular business in fixed locations anywhere in the country, such as convenience stores, pharmacies and other highly accessible retail outlets.

Cash agents enable banks to leverage on innovative digital solutions to serve a wider client base, particularly in the low-income and rural areas where there is limited commercial incentive to establish a full branch or even a micro-banking office (MBO).  Through this new cost-efficient service channel, serving the currently unbanked and low-income segments can become more viable and sustainable for banks.  Data from the BSP shows that more than 36% of all the municipalities in the country have no banking presence although most of these are served by a variety of non-bank financial institutions like pawnshops, cooperatives, and lending investors.
 
In addition to these new service delivery models, the Monetary Board also relaxed existing regulations on offsite deposit servicing as well as deposit solicitation, by removing highly prescriptive operational requirements and conditions before banks may engage and offer these services.  The amended regulations provide banks with more flexibility in designing appropriate and cost-efficient ways to render deposit pick-up and delivery services and as a result, enhance client experience. 

To ensure the safety and soundness of banks as well as to uphold consumer protection, the guidelines emphasize banks’ responsibility for ensuring the adequacy of risk management and internal control systems for these liberalized deposit servicing activities.  The BSP will evaluate the quality and sufficiency of these risk management and control systems before granting authorization to perform banking services outside bank premises.

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