The Philippines is beginning to establish AI governance frameworks for its financial sector, even as digital banking adoption has exploded from just 8 percent in 2019 to 58 percent today. Regulators are setting increasingly demanding compliance standards for fintech companies, creating both opportunities and barriers for those seeking to enter one of Southeast Asia's most competitive markets.

Why Is the Philippines Suddenly Tightening Fintech Regulation?

The speed of digital finance adoption in the Philippines has caught regulators' attention. In just over a year, the country lifted its moratorium on digital bank licenses, exited the Financial Action Task Force (FATF) grey list of jurisdictions under enhanced monitoring, passed landmark e-governance legislation, and begun laying the groundwork for AI and cross-border payment rules. This rapid regulatory evolution reflects a simple reality: the fintech sector has outgrown its early-adopter phase, and policymakers are racing to keep pace.

The Bangko Sentral ng Pilipinas (BSP), the country's central bank, has set a ceiling of ten digital bank licenses. Only six have been granted to date, leaving four slots available. However, the application window was brief. In January 2025, the BSP lifted a moratorium on new applications, but by December 2025, it had been re-imposed, closing the direct application route.

"The practical effect of this policy shift is to compel traditional banks to accelerate their digital transformation efforts in order to remain competitive against more technologically native entrants," said Alain Charles Veloso, partner at Quisumbing Torres.

Alain Charles Veloso, Partner at Quisumbing Torres

What Are the New Compliance Barriers for Fintech Companies?

For companies seeking to operate in the Philippine fintech space, the compliance bar has risen significantly. Prospective digital bank applicants must now meet substantial requirements, including transparency of ownership, fitness and propriety assessments of shareholders and management, and a 1-billion-peso (approximately $16 million) minimum capital requirement. Foreign-backed applicants face even narrower pathways, as Philippine law permits ownership beyond 40 percent only in favor of "qualified foreign banks."

The BSP has also signaled that when the application window reopens, it will not be an open door. The regulator has declared that applicants must bring something genuinely new to the table, targeting underserved or untapped market segments. Additionally, a draft BSP Circular proposes that at least 30 percent of a rural bank's total customer base must be located within its designated area of operation, a measure designed to prevent companies from acquiring small rural banks to leverage their licenses for nationwide digital-first businesses.

How Are Fintech Companies Adapting to Regulatory Changes?

With the direct application route now closed, fintech players are pursuing alternative strategies. There has been a considerable increase in interest in strategic partnerships with, and acquisitions of interests in, existing digital banks, smaller digital-centric banks, and non-bank BSP-licensed fintech companies. This shift reflects a pragmatic response to regulatory constraints.

The Philippines' exit from the FATF grey list in February 2025 has also reshaped the compliance landscape. While the delisting signals progress, it has raised baseline expectations for all regulated entities, including fintech companies. Firms are now expected to strengthen several key compliance areas:

• Risk-Based Customer Due Diligence: Enhanced verification of customer identity and beneficial ownership information to prevent financial crimes and money laundering.
• Ongoing Transaction Monitoring: Continuous surveillance of customer transactions to detect suspicious patterns and potential illicit financial activity.
• Sanctions Screening: Automated checks to ensure customers are not on government sanctions lists or linked to prohibited entities.
• Enhanced Due Diligence for High-Risk Customers: Deeper investigation of customers and cross-border transactions that pose elevated compliance risks.

"Delisting should not be treated as an occasion to relax compliance standards; rather, the removal raises the baseline expectation for all regulated entities, including fintech companies," noted the Quisumbing Torres team.

Quisumbing Torres Legal Team

What New Opportunities Are Emerging From E-Governance Legislation?

The E-Governance Act, passed by Congress in June 2025, is creating new pathways for fintech participation in government financial systems. The law mandates the establishment of Government Digital Payment Systems aimed at modernizing public financial transactions and promoting financial inclusion. This creates significant opportunities for electronic payment providers, payment system operators, and other fintech companies to participate in the Philippine government's digital payment system for taxes and fees.

However, engaging with government systems comes with additional compliance obligations. Entities integrating with government networks must comply with the Department of Information and Communications Technology's cybersecurity and data-sharing standards and may trigger requirements under the New Government Procurement Act. The compliance architecture now includes strict interoperability obligations, heightened security and audit standards, and enhanced data privacy requirements for firms seeking access to government collections and disbursements.

"The E-Governance Act creates significant opportunities for electronic payment providers, payment system operators, and other fintech companies to participate in the Philippine Government's digital payment system for taxes and fees," explained John Paul V. de Leon, partner at SyCipLaw.

John Paul V. de Leon, Partner at SyCipLaw

For fintech companies operating in payments, remittances, and digital assets, the principal challenge lies in maintaining and building upon the standards that enabled the country's delisting from the FATF grey list in the first place. As the BSP itself has noted, removal from the grey list is "not an end but part of a continuing task to safeguard the economy against financial crimes".

The Philippines' regulatory evolution reflects a broader global trend: as automation and technology become more central to financial services, regulators are moving faster to establish guardrails. For fintech companies, the message is clear: opportunities are plentiful, but only for those who can meet an increasingly demanding compliance bar.