The banking system in the Philippines is diverse and plays a crucial role in the country's economic development. It consists of various types of banks, each serving different sectors of society, from individuals to businesses, and ranging from large institutions to community-based organizations. Hence, understanding the classification of these banks is essential for choosing the right financial institution that meets specific needs, whether for personal banking, business services, or specialized financial solutions.
Banks in the Philippines are categorized based on their services, clientele, and regulatory classifications. These include universal banks, commercial banks, thrift banks, rural banks, cooperative banks, and Islamic banks, each offering a unique set of services. Therefore, in this article, we will explore the different classifications of banks, providing a comprehensive list of the prominent financial institutions in each category, which will help you in selecting the right banking partner.
Additionally, we'll also mention the impact of digital banking on the overall Philippine banking landscape and how foreign banks have influenced the Philippine banking sector, and uncover how banking regulations are shaping banking practices and fueling economic growth. So, without much ado, let us take a look at the classification of banks in the Philippines.
Classification of Banks in The Philippines
When it comes to banking in the Philippines, understanding how banks are classified can provide you with a clearer picture of the financial landscape. The Bangko Sentral ng Pilipinas (BSP), the country's central bank, categorizes banks into several types: universal banks, commercial banks, NBFIs, thrift banks, rural banks, cooperative banks, and Islamic banks. Each of these categories serves a specific function and meets different needs within the financial ecosystem.
Here's a closer look at each type:
1. Universal Banks
Universal banks are the largest and most comprehensive type of bank in the Philippines. They offer a full range of financial services, including deposit-taking, loans, investment banking, and foreign exchange. They can also engage in insurance, underwriting, and other non-traditional banking activities. Some of the largest universal banks in the Philippines include BDO Unibank, Bank of the Philippine Islands (BPI), and Metrobank. These banks are highly regulated and typically serve both individual and corporate clients.
2. Commercial Banks
Commercial banks are similar to universal banks but tend to focus more on traditional banking services, including savings and checking accounts, personal loans, and business loans. They are designed to serve both individuals and businesses but do not offer as wide a variety of financial services as universal banks. Philippine National Bank (PNB) and the EastWest Bank are examples of commercial banks in the Philippines. They are usually smaller than universal banks but still hold a significant market share.
3. Non-Bank Financial Institutions (NBFIs)
NBFIs in the Philippines include institutions that provide financial services similar to banks but do not have full banking licenses. They offer specialized services such as asset management, leasing, and financing, but they cannot accept deposits. Examples of NBFIs include Pioneer Insurance, N90, and the Philippine Business Bank (PBB). These institutions are vital in providing credit and other financial products to both individuals and businesses that may not have access to traditional banking services.
4. Thrift Banks
Thrift banks are specialized financial institutions that focus on savings and small to medium-sized loans. They cater primarily to individual depositors, offering higher interest rates on savings and offering loans at competitive terms. Thrift banks in the Philippines play an essential role in promoting savings and providing credit to low- and middle-income individuals. Philippine Veterans Bank and Land Bank of the Philippines are examples of thrift banks. These banks tend to focus more on retail customers than large corporate clients.
5. Rural Banks
Rural banks are located primarily in rural areas and focus on serving the needs of farmers, fishermen, and rural communities. They provide basic banking services like savings accounts, loans, and microfinance products aimed at boosting rural economies. These banks often help fund agricultural development and small-scale enterprises. Rural Bank of Mabitac and First Rural Bank of Negros Occidental are examples. They are integral in improving financial inclusion and empowering rural communities.
6. Cooperative Banks
Cooperative banks in the Philippines are member-owned financial institutions that aim to provide affordable financial services to their members. They focus on savings and credit products for small business owners, farmers, and individuals in rural communities. Cooperative banks work on a shared profits model, where the members share the financial benefits. The Cooperative Bank of Nueva Ecija and the Central Visayan People's Credit Cooperative are examples of cooperative banks in the Philippines.
7. Islamic Banks
Islamic banks operate according to the principles of Islamic law (Sharia), which prohibits earning interest on loans or investments. Instead, they engage in profit-sharing arrangements and other permissible financial transactions. These banks cater to Muslim communities but serve anyone interested in ethical, interest-free banking. Al-Amanah Islamic Bank, the first and only Islamic bank in the Philippines, provides services such as savings accounts, personal loans, and investment products based on Islamic financial principles.
Universal Banks: The Financial Powerhouses
Universal banks in the Philippines are often recognized as the pillars of the country's financial system, playing a substantial role in catalyzing economic growth. These financial behemoths offer a diverse array of services, from investment to commercial and development banking, under one roof. Their versatility allows them to cater to a wide range of financial needs, making them integral to both the corporate and personal finance sectors.
Key Features
Universal banks are the largest and most versatile financial institutions in the Philippines, offering a wide range of services that cater to both individual and corporate clients. Below are the key features of universal banks in the Philippines:
- Wide Range of Services - Universal banks offer comprehensive financial services such as deposit accounts, loans, investments, insurance, and foreign exchange. They serve a diverse customer base, including individuals, businesses, and government entities.
- Investment Banking - Unlike other types of banks, universal banks can engage in investment banking activities, such as underwriting securities, asset management, and mergers and acquisitions.
- Large-Scale Operations - Universal banks operate on a large scale, with extensive branch networks and online banking platforms, ensuring accessibility for customers across the country.
- Corporate and Retail Banking - These banks provide both corporate banking services, such as business loans and treasury management, and retail banking services, including savings accounts and personal loans.
- International Operations - Universal banks in the Philippines often have international branches and partnerships, enabling them to enable cross-border transactions and serve the global needs of their clients.
For those keen to explore more about how these financial institutions operate and their difference from commercial banks, there's an informative video you can watch: Universal and Commercial Banks - Their Role and Features. The video succinctly breaks down the roles these banks play, enriching your understanding of why they are regarded as financial powerhouses.
Also Read: Top 10 Commercial Banks in The Philippines as of 2025
Commercial Banks: Backbone of the Banking System
Commercial banks hold a pivotal position within the financial landscape of the Philippines, functioning as the backbone of the banking industry. These banks are crucial to the economic framework as they provide fundamental services that support both businesses and individuals across the nation. Commercial banks are known for their wide reach and the variety of services they provide to meet the needs of different market segments.
Key Features
Commercial banks in the Philippines serve as vital players in the country's financial sector. Below are some of their key features:
- Wide Range of Financial Products - Commercial banks offer various services, including savings and current accounts, personal loans, business loans, and investment options. This diversity makes them ideal for both personal and corporate clients.
- Business and Corporate Banking - These banks provide specialized services for businesses, including working capital loans, trade financing, and merchant services. They play a crucial role in supporting business growth and economic development.
- Extensive Branch Network - Commercial banks in the Philippines typically have a large network of branches and ATMs nationwide, making banking accessible even in remote areas.
- Deposit and Investment Services - They offer competitive interest rates on deposit accounts, fixed deposits, and other investment products, helping individuals and businesses grow their savings.
- Foreign Exchange Services - Commercial banks facilitate currency exchange services for international transactions, catering to both individual and corporate clients involved in import/export or travel.
Also Read: Nonbank Financial Institutions and Their Role in The Philippines' Financial Stability
Non-Banking Financial Institutions: Quick Approvals For SMEs
Non-bank financial Institutions (NBFIs) play a vital role in the Philippine financial system. They provide financial services similar to traditional banks but differ in that they do not have full banking licenses and are not authorized to accept deposits. NBFIs are crucial for expanding financial access to underserved segments of the population and supporting economic growth in the country.
Key Features of NBFIs
Non-banking financial Institutions (NBFIs) in the Philippines play a vital role in providing specialized financial services to various market segments. Below are some key features of NBFIs in the Philippines:
- Specialized Services - NBFIs focus on niche financial services like insurance, leasing, micro-lending, and asset management, catering to specific market needs.
- No Deposit-Taking Capability - Unlike banks, NBFIs cannot accept deposits but generate capital through investments, loans, and other financial products.
- Financial Inclusion - NBFIs provide financial services to underserved or unbanked populations, promoting broader access to credit and savings opportunities.
- Flexible Financing Options - They offer flexible loans and financing arrangements, particularly for small businesses and individuals who may not qualify for traditional bank loans.
- Regulation by Relevant Authorities - NBFIs are regulated by various government bodies like the Bangko Sentral ng Pilipinas (BSP), ensuring compliance with financial standards.
Also Read: Tech Startups and Government Funding Opportunities in The Philippines
Looking to expand your SME? Apply for N90's fast financing solutions and receive potential loan approvals within 24 hours. Connect with us at N90 today, and let us help you achieve your Philippine business goals with ease and confidence.
Thrift Banks: Serving Retail and SME Markets
Thrift banks, also known as savings and mortgage banks, hold a pivotal place in the Philippine financial system. These institutions are tailored to serve individuals and small businesses, focusing specifically on retail banking services and encouraging financial inclusion. This makes them an integral part of the financial ecosystem, especially for communities looking to embrace a savings culture or secure loans for personal and business growth.
Key Features
Thrift banks in the Philippines play a vital role in the country's financial system by offering savings and lending services to individuals, small businesses, and entrepreneurs. Below are the key features that define thrift banks in the Philippines:
- Focus on Savings and Loans - Thrift banks primarily offer savings accounts, time deposits, and personal loans, making them a popular choice for individuals and small businesses looking for low-cost banking services.
- Lower Operating Costs - With fewer branches compared to larger banks, thrift banks tend to have lower overhead costs, which translates to more affordable services, such as competitive interest rates and fewer fees.
- Emphasis on Local Communities - Many thrift banks serve specific communities, focusing on building relationships and catering to the needs of residents and businesses.
- Accessibility to Small Businesses - Thrift banks offer accessible credit options to small and medium-sized enterprises (SMEs), helping to drive economic growth in local economies.
- Personalized Banking Services - Thrift banks are known for their more personalized customer service, often offering tailored solutions to meet the unique needs of their clients.
Also Read: Loan Table for Teachers with EastWest Bank
Rural and Cooperative Banks: Supporting Agriculture and Rural Development
Rural and cooperative banks play a pivotal role in accelerating and enabling the growth and development of rural areas in the Philippines. These banks cater to the unique needs of agricultural and rural communities, providing essential financial services often not accessible through traditional commercial banking channels.
Rural banks are financial institutions committed to serving the segments of the population residing in rural areas. Unlike commercial banks that primarily operate in urban settings, rural banks are strategically distributed across the countryside, ensuring that financial services reach even the remotest communities.
Key Features
Rural and cooperative banks play an essential role in promoting financial inclusion and supporting the economic development of rural and underserved communities in the Philippines. Here are the key features of rural and cooperative banks in the Philippines:
- Focus on Rural Communities - Rural banks primarily serve people in rural and agricultural areas, providing essential banking services such as savings accounts, loans, and microfinance products to local communities.
- Specialized Loan Products - These banks offer specialized loans tailored for agricultural, rural, and micro-entrepreneurs, often with lower interest rates and more flexible repayment terms than traditional banks.
- Cooperative Ownership - Cooperative banks are member-owned financial institutions that provide financial services to their members, typically focused on improving the economic welfare of the community through savings, credit, and insurance services.
- Promoting Financial Inclusion - Both rural and cooperative banks focus on promoting financial inclusion by providing banking access to underserved populations that traditional banks might overlook.
- Lower Operational Costs - These banks often have lower operational costs, which allows them to offer more affordable and accessible financial products, such as low-cost loans and deposit services.
Also Read: Top 10 Philippine Rural and Cooperative Banks by Total Assets
Digital Banking Revolution in The Philippines
The introduction of digital banking in the Philippines marks a turning point in how financial services are delivered and consumed. This transformation is not purely about the adoption of technology but represents a fundamental shift in the banking landscape that caters to the evolving needs of modern consumers.
Key Features of Digital Banks in The Philippines
Digital banks in the Philippines are transforming the financial sector by offering more accessible, efficient, and user-friendly banking services. These banks utilize technology to provide banking solutions without the need for physical branches. The rise of digital banking in the country has introduced new features that cater to modern consumer needs, making financial services more inclusive and convenient.
Here are the key features of digital banks in the Philippines in greater detail:
- Mobile-First Platform - Digital banks in the Philippines are built with a mobile-first approach, meaning they are designed to be accessed primarily through smartphones and mobile apps. This feature ensures that users can manage their finances on the go, making banking easier and more convenient.
- Paperless Account Opening - One of the standout features of digital banks in the Philippines is their ability to offer a completely paperless account opening process. Customers can sign up, verify their identity, and begin using banking services all through their smartphones, without the need for physical documents.
- Competitive Interest Rates and Low Fees - Digital banks are able to offer more attractive interest rates and lower fees compared to traditional banks. Without the overhead costs of maintaining physical branches, these banks pass on the savings to customers through higher interest rates on savings accounts and lower transaction fees.
- Instant Fund Transfers and Real-Time Banking - Digital banks in the Philippines offer real-time banking, meaning that transactions such as fund transfers and bill payments are processed instantly. This eliminates the delays typically associated with traditional banks, where transfers can take hours or even days to process.
- Enhanced Security Features - Security is a top priority for digital banks, and they incorporate advanced security measures to protect customer data and transactions. These include biometric authentication, such as fingerprint scanning or facial recognition, to ensure only authorized users can access accounts.
Also Read: Digital Banks in The Philippines: A Look at Profitability And Establishment
When it comes to safeguarding your finances, choosing a bank with strong fraud prevention measures is crucial. Some banks in the Philippines have invested heavily in technology to protect their customers from scams and fraud. So, if you're curious about which banks are best at combating fraud, in that case, you can explore insights and personal experiences in this Reddit thread where users discuss their experiences with banks that offer top-notch security features.
Top Digital Banks Operating in The Philippines
The digital banking revolution in the Philippines is reshaping the way Filipinos manage their finances, providing greater convenience, accessibility, and innovation. These banks are changing the traditional banking landscape, making it easier for people to access financial services without needing to visit a physical branch.
Here's a closer look at some of the prominent digital banks currently operating in the Philippines:
1. RCBC Bankard (RCBC Digital Bank) - RCBC, one of the largest banks in the Philippines, launched its digital bank platform to offer a more streamlined, mobile-first banking experience. RCBC Digital Bank allows customers to open an account in just a few minutes with minimal requirements, making banking accessible to more Filipinos, especially those in rural areas.
2. Tonik Digital Bank - Tonik is a digital-only bank that brings innovative banking solutions to Filipinos. Launched in 2021, Tonik aims to provide a simple, cost-effective way for users to manage their finances. The bank offers savings accounts, loans, and even fixed deposits, all with zero monthly fees. Tonik's platform is built around a customer-friendly app that makes banking easy, fast, and transparent.
3. UnionDigital Bank - UnionBank's digital platform, UnionDigital Bank, is designed to cater to the needs of the digital-savvy Filipino consumer. UnionDigital offers a variety of financial products, including savings accounts, digital loans, and insurance, all accessible through a mobile app. It prides itself on offering a fully digital experience that is seamless and efficient, with features like instant account opening and no hidden fees.
4. GSave by GCash and CIMB Bank - GSave is a partnership between GCash, the Philippines' leading mobile wallet app, and CIMB Bank, a major digital bank. This collaboration offers users the ability to save money directly from their GCash accounts, providing a seamless and secure digital savings solution. The savings account is free, and GSave offers competitive interest rates of around 2.6% annually, which makes it a popular choice among Filipinos who want to grow their savings with minimal effort.
5. Bank of the Philippine Islands (BPI Online) - BPI, one of the oldest and largest banks in the Philippines, has embraced digital banking with its reliable and intuitive online and mobile banking platforms. The BPI app allows customers to conduct a wide range of banking activities, such as bill payments, fund transfers, and account management, all from their smartphones.
Conclusion
In conclusion, understanding the different classifications of banks in the Philippines is crucial for both individuals and businesses looking to navigate the country's financial system. From universal banks that offer comprehensive services to niche institutions like rural and cooperative banks, the diverse banking options ensure that everyone, regardless of their needs or location, has access to financial products suited to their requirements.
Each type of bank plays a specific role in driving financial inclusion, supporting economic growth, and enabling innovation within the financial sector. So, Filipino entrepreneurs like you must thoroughly research the type of bank and their offerings before opting for one. Doing so will ensure you always avail yourself of loans and services that are in your best interest and at favorable terms.
For aspiring Filipino entrepreneurs, despite having a wide array of banking options available, NBFIs like N90 offer a valuable opportunity to secure dedicated SME loans. These loans are designed to support SMEs in their early stages, helping entrepreneurs access the necessary funds to kickstart and grow their businesses. N90's focus on providing financing options tailored to the unique needs of SMEs ensures that even those without access to traditional bank loans can achieve their business goals. Connect with us at N90 to learn more.
Frequently Asked Questions (FAQs)
1. What are the 4 main types of banks in the Philippines?
The four main types of banks in the Philippines are:
- Universal Banks - They offer a wide range of services, including deposits, loans, investments, and insurance.
- Commercial Banks - Provide traditional banking services like savings accounts and business loans.
- Thrift Banks - Focus on savings and loans for individuals and small businesses.
- Rural Banks - Serve rural areas with savings, micro-loans, and agricultural financing.
2. What is the classification of BDO bank in the Philippines?
BDO Unibank, commonly known as BDO, is classified as a universal bank in the Philippines. As one of the largest banks in the country, BDO offers a comprehensive range of services, including savings and checking accounts, loans, investments, insurance, and foreign exchange. It serves both individual and corporate clients, with a strong presence across the country.
3. What are the 5 core functions of a bank in the Philippines?
The five core functions of a bank in the Philippines are:
- Accepting Deposits - Safeguarding customers' money in savings, current, and time deposit accounts.
- Providing Loans - It must offer personal, business, and mortgage loans.
- Money Transfers - Facilitating fund transfers within and outside the country.
- Investment Services - Offering investment products like mutual funds and bonds.
4. What is a nationalized bank in the context of the Philippines?
In the context of the Philippines, a nationalized bank refers to a financial institution that is owned and operated by the government. These banks are established to promote economic development, ensure financial stability, and provide accessible banking services, especially to underserved sectors. An example is the Land Bank of the Philippines, which supports agriculture and rural development.
