The digital banking war in the Philippines has entered a brutal and decisive phase this week. While millions of Filipinos are currently enjoying high interest rates on their savings, the financial institutions paying them are quietly bleeding cash. New industry data reveals a stark reality where most players are fighting to stay afloat.
Only two of the original six digital banks have managed to turn a profit as of early 2026. This financial instability comes at a precarious time because the Bangko Sentral ng Pilipinas (BSP) is preparing to open the floodgates to even more competition. The race is no longer just about acquiring users. It is now a desperate sprint for sustainability.
The Profitability Crisis Hitting The Sector
The promise of digital banking was simple and seductive. No physical branches meant lower costs and better rates for the people. However, the reality has proven to be much more expensive than anticipated.
Only Maya Bank and Overseas Filipino Bank (OFBank) have reported net profitability as of late 2025.
For the other players in the market, the burn rate is alarming. Banks like Tonik, UNO Digital Bank, GoTyme, and UnionDigital have spent massive amounts of capital to acquire customers. They offered hefty interest rates to lure depositors away from traditional giants like BPI and BDO.
This strategy worked to get users through the door. But it failed to generate sustainable revenue.
The core problem is lending. To make money, these banks need to lend out the deposits they collect. But building a reliable loan book in a market with limited credit data is incredibly difficult. Many digital banks are sitting on piles of cash they are paying interest on, without enough safe borrowers to lend it to.
BSP Opens Doors to Global Giants
Despite the struggle of existing players, the regulator is not hitting the brakes. The BSP has confirmed it intends to issue up to four new digital banking licenses by March 2026. This move aims to fill specific gaps in the financial ecosystem that the current six banks have ignored.
Melchor Plabasan, a Senior Director at the BSP, made the regulator’s stance clear during a recent briefing.
This statement signals that the BSP is looking for niche players. They want banks that can serve small businesses or offer unique cross-border solutions.
Rumors are currently swirling that UK-based fintech giant Revolut is among the top contenders for a new license. If Revolut enters the market, it could disrupt the sector entirely. Their potential introduction of multi-currency savings accounts would appeal to the massive freelancer market in the Philippines.
Existing local players are terrified of this possibility. They are already struggling to compete with each other. The entry of a global giant with deep pockets could trigger a price war that the smaller banks simply cannot survive.
High Risks and Identity Fraud
There is another silent killer eating away at digital bank profits. It is not just about competition or interest rates. It is about fraud.
Fraud risk for digital banks remains dangerously high due to identity verification issues.
Greg Krasnov, the CEO of Tonik, recently sounded the alarm on this specific issue. He highlighted that identity verification in the Philippines is still fragmented. Scammers are becoming sophisticated. They use fake IDs and synthetic identities to open accounts and take out loans they never intend to pay back.
Here is why fraud hits digital banks harder than traditional banks:
- No Face-to-Face Checks: Everything is done via an app, making it easier to fake a persona.
- Speed is a Weakness: Instant approval processes often skip deep background checks.
- Syndicate Attacks: Organized crime groups target new apps with weak defenses.
When a digital bank loses money to a fraudulent loan, it is a direct hit to their bottom line. It wipes out the profit from dozens of good customers. This forces banks to be stricter with loans, which ironically slows down their path to profitability.
What This Means for Filipino Savers
The fierce competition creates a golden age for the average Filipino depositor. At least for now.
You can currently find savings accounts offering interest rates exceeding 3% per annum. This is significantly higher than the traditional bank average of 1.8%. Some promotional rates even climb higher for short periods.
However, consumers should remain vigilant. The aggressive “cash burn” strategy cannot last forever.
If the new entrants squeeze margins too tight, we might see consolidation in the market. Smaller digital banks might be bought out or forced to merge to survive.
For the savvy depositor, the advice is simple. Enjoy the high rates while they last. But always keep an eye on the financial health of the institution holding your money. The next twelve months will decide who stays and who folds.
