By John Manning, International Banker
It is no secret that the global banking system has been severely tested over the last couple of years, as the coronavirus pandemic has put the brakes on business activity across much of the world. And as people and businesses shifted more rapidly to online banking than ever before, it soon became apparent that those banks with clear, well-developed digital-banking strategies firmly in place were better positioned to withstand this dramatic change.
That’s why Union Bank of the Philippines (UnionBank) has performed so admirably during this tough period. Already an unequivocal digital trailblazer in both the Philippines and Southeast Asia, UnionBank’s commitment to relentlessly pushing the digitalisation envelope for consistently enhanced customer experience has meant that it has been able to adapt to this new normal with considerable strength and resilience.
A quick glance at the bank’s 2020 financial results, for instance, reveals growth across a number of key metrics, including net interest income (NII), net revenues and total deposits, as well as double-digit stock-price gains. As far as UnionBank’s president and chief executive officer, Mr. Edwin Bautista, is concerned, moreover, it is the bank’s robust digital-transformation strategy that has underpinned the bank’s buoyant performance through challenging headwinds. For instance, business continuity was maintained thanks to the wealth of digital tools that had already been developed by the bank several years prior to the pandemic, enabling employees to work from home almost seamlessly.
The extensive array of digital channels and platforms at the bank’s disposal have also been pivotal in ensuring the client-onboarding process has remained straightforward and uncomplicated—again, ensuring that business continuity would not be significantly compromised. The particularly easy practice of banking via UnionBank apps and platforms has also helped the bank boost its volume of customer CASAs (current account savings accounts). Lending has also been sustained to important client segments throughout the pandemic, moreover, including MSMEs (micro, small and medium-sized enterprises) through the bank’s fintech spinoff UBX’s lending platform SeekCap via the UnionBank Online app, and teachers via the bank’s subsidiary City Savings Bank.
“Of course, the culture within the organization was to respond quickly to the impact of the pandemic,” noted Mr. Bautista. “We were quick to launch innovations. We quickly decided to go full throttle to ride the shift of customer behaviour towards digital.”
“This is a major step for us, and it is also an affirmation that even during these crisis times, there are companies that continue to invest in the future of the Philippines,” Mr. Bautista recently said of the Innovation Campus.
And given the often-crippling impacts of the pandemic on the economic prospects of ordinary citizens, it has been encouraging to observe the emphasis placed by UnionBank on boosting financial inclusion throughout the Philippines. Financial inclusion is a vital component for the realization of the Philippines’ vision to become a G20 country by 2050; the bank’s inclusive Tech Up, Pilipinas philosophy commits it from the outset to a strategy of promoting financial inclusion for sustainable prosperity, particularly for the large population of unbanked and financially underserved Filipinos, who represent around half of the country’s 108 million citizens.
As Mr. Bautista explained, the Tech Up, Pilipinas strategy is facilitating several key initiatives pertaining to financial inclusion, such as the Supreme Court of the Philippines’ Judiciary ePayment System Project, distribution of the government’s Social Amelioration Program (SAP), development of tech solutions such as digital payments for local government units and clients, education of more people about transforming their own organizations and cultures via the Asian Institute of Digital Transformation (AIDT) partnership, and many more initiatives.
Taking the Judiciary ePayment System Project as just one example, the Supreme Court recently signed a memorandum of agreement (MOA) with UnionBank to develop an application that provides the Supreme Court, as well as more than 2,000 courts across the country, with options to receive fees and payments digitally from litigants and their counsels and representatives in a safe, secure, real-time and continuous way from anywhere at their convenience. As such, the project eases the payment process for a number of important stakeholders within the legal system, something that is especially pertinent amid this pandemic. UnionBank will provide technical assistance to the Supreme Court in the form of information technology (IT) and process advisory, consulting, deployment of mutually agreed IT experts and business-process engineers, extension of the use of mutually agreed on IT tools that UnionBank will utilize in the project along with implementation plans to cover all phases.
“The Bank became the technology and banking partner of the Supreme Court in its digitization journey and is the first universal bank to be onboarded onto the Judiciary ePayment System,” explained Mr. Bautista. “This pioneering project standardizes the rules and assessments for the 11 payment account types identified by the Supreme Court. It also aims to eliminate reconciliation issues for funds received by automatically correlating the main litigation transactions to the 11 account types.”
Another notable move made by UnionBank was the decision to spin off UBX, its fintech venture studio and fund, in 2018. The standalone entity has gained significant traction in its first three years, thanks in no small part to one of its flagship projects, the blockchain-powered i2i platform, which is now widely recognized as one of the Philippines’ largest and fastest-growing financial networks, serving a multitude of financial institutions including cooperatives, savings, thrifts and rural banks. During the COVID-19 crisis, UBX leveraged the capabilities of i2i to digitally transform several community-based financial institutions, thus enabling its customers nationwide to send funds and payments to more than 11,000 locations around the country via digital cash transfers.
And in response to the growing and pressing need to digitally enable the distribution of and access to funds, i2i built a Mobile ATM that brings ATM (automated teller machine) services to local communities whilst also providing additional sources of income to businesses. By reducing travel and bringing cash distributions closer to home, therefore, communities have been able to enjoy safer access to funds whilst ATM customers have saved time and money. And to gauge the customer response to this innovative solution, one need only look at the monthly i2i Mobile ATM volumes for the latter half of 2020, which rose by an astonishing 3,000 percent during those six months. This year, moreover, i2i has acquired more than 1,500 new financial-services providers and agents to its network via a joint venture with the Irish financial-services technology giant Fexco.
Mr. Edwin Bautista joins us today to discuss that digital journey and how the cutting-edge Philippine lender has coped so well in the face of the pandemic.
Mr. Bautista, welcome….
I imagine the need for innovation must be especially important during these times of crisis. With that in mind, has COVID-19 and the resulting lockdowns accelerated the development of UnionBank’s digital-banking offerings and, if so, which ones in particular?
Yes, the pandemic accelerated our digital strategy. For instance, we fast-tracked our digital customer-acquisition targets from five years to one-to-two years. And this meant enhancing our capabilities to be ready for this scale. This has included ensuring digital KYC (know your customer) features are stable, introducing more features into our app that are relevant to the needs of our customers during the lockdown, such as Send to Remittance Centers, deposit via ECPay counters including 7-Eleven, launch of InstaPay 2.0 allowing transfer of funds using a mobile number or email, Bank-on-Wheels to support areas with large transaction needs and for the distribution of SAP (Social Amelioration Program), launch of MSME Business Banking and many more.
We even collaborated with the BTR (Bureau of the Treasury) for the launch of Bonds.PH, which enabled retail investors to participate in the fund-raising endeavours of the national government.
The bond programme sounds particularly interesting, especially with UnionBank having recently launched the first app-based blockchain-enabled government-bond distribution in Asia. For what reason did you decide to develop such a product? And what does this mean in terms of promoting financial inclusion in the Philippines?
Recognizing that digital technology is helping address unprecedented challenges brought about by COVID-19, UnionBank collaborated with the Philippine government in its effort to raise debt financing through retail treasury bonds (RTBs), specifically RTB-24 or the Progreso Bond. The proceeds of the raise were allocated to the government’s COVID-19 relief programs.
Aiming to improve access to safe investments and promote financial inclusion, UnionBank launched the first app-based, blockchain-enabled government-bond distribution in Asia. This allows Filipinos to invest as little as US$100 in the country’s retail treasury bonds via an all-digital process from anywhere in the world. The project was completed in partnership with our tech partner PDAX (Philippine Digital Asset Exchange) and the Bureau of the Treasury.
Our Bonds.PH app makes access to RTBs easy, safe and secure. It’s completely digital and available 24/7. Filipinos, including the unbanked and more than 10 million citizens residing and working overseas, purchase RTBs by downloading the app and pay using e-wallets, online banking and over-the-counter options. Bonds are also made more affordable with lower minimum investments than other RTBs.
UnionBank and PDAX measure its success with metrics such as user count, product usage, transaction volume, aggregate amount of treasury-bond subscriptions, number of downloads, diversity of customer base, customer experience and transaction speed. Longer term, success will be measured in active-user count, churn, average transaction per user and number of new issuances on the Bonds.PH app. Since its launch only a month ago, the app has already had more than 20,000 downloads to date.
This is a game-changer in financial inclusion because more retail investors can now participate and help the government raise funds, which before was reserved for only a select few who had access to the BTR’s issuances. It is also encouraging to see the government itself pushing for digital solutions and even promoting the use of blockchain as ways to achieve financial inclusion.
You mentioned the launch of the MSME Business Banking app earlier. What did this involve, and what are the main additional ways through which the bank has managed to extend support to the Philippines’ crucially important MSME sector during these tough times?
Prior to COVID, UnionBank had already laid the groundwork to address these challenges by introducing an MSME banking hub. The first-to-market UnionBank SME Business Banking app came at the perfect time in 2020 to cater to the shifting needs of SMEs (small and medium-sized enterprises) by offering the widest range of digital options and functionalities in managing their financial transactions; it was the first bank to introduce mobile check deposits, which was the most-used feature during the lockdown due to the protocols set by the government, and the first bank in the country to introduce digital account opening for SMEs.
In addition to this, there was a significant increase of banking customers coming from the platform, with a total of more than 13,000 new SME business and personal accounts for 2020, contributing a total of $55 million in deposit balances and $96 million in loans. The app also has the most extensive list of government and utility billers for bill payments, local and international batch bank transfers, setup of customized and complex approval flows, batch account openings and management of payroll accounts, and a single log-in for all enrolled companies and subsidiaries.
It includes a payment-gateway feature beneficial for SME owners to create a unified payment solution for easy collection. With a simple link, customers may pay through channels such as Visa and Mastercard. Other payment options to be included are InstaPay, over-the-counter, digital wallets, UnionBank online, among many.
To address the need for more access to credit, UnionBank’s business loan via UBX’s SeekCap platform offers a convenient and straight-through digital-application process, allowing SMEs to receive credit decisions within five minutes or less. This is possible with the aid of APIs (application programming interfaces), which pull data in real-time and feed it into our credit-scoring algorithm, which is continuously enhanced through machine learning.
Lastly, UnionBank’s GlobalLinker, an AI (artificial intelligence)-powered digital platform entirely dedicated to SMEs that can use the platform free of cost, transforms how the bank serves and supports SMEs. The platform has reached a total of 53,000 SMEs, enabling affinity partners where communities of SMEs are onboarded to the platform with the help and promotion of key organizations, such as the Department of Trade.
Other solutions offered by UnionBank’s fintech spin-off UBX that have benefitted MSMEs in the past year include Sentro, which allows SMEs to easily create their very own e-commerce sites in minutes and has helped more than 30,000 merchants to date, and BUX, which provides access to a wide range of payment gateways and has more than 100,000 SMEs registered on the platform to date.
Can you briefly explain what the Digital RM Project is, as well as Max 5, the bank’s new customer relationship management (CRM) tool?
The Digital RM Project is a first-of-its-kind use of a CRM (customer relationship management) platform for sales and marketing in the Philippine banking and finance environment. It integrates digital and non-digital initiatives to equip our relationship managers (RMs) with the mindset, knowledge, information, methodology and tools to perform five times better than our competitors. It digitizes back-end and client-related processes, which were paper-heavy and time-consuming, thus resulting in quicker turn-around and completion times and enhancing the UnionBank customer experience.
At the heart of this project is Max 5, a powerful CRM tool that provides our entire sales team with a single, unified platform for planning, marketing, servicing, reporting, monitoring, communicating. Max 5, powered by a mobile app and accessed via smartphones and laptops, includes impressive functionalities.
Qualitatively, clients are delighted with the enhanced customer servicing. Quantitatively, the results below are a testament to the success of the Digital RM Project:
- 100 percent more qualified leads for the RMs as provided by data analytics,
- 400 percent more leads engaged by RMs,
- 500 percent more conversions from qualified leads.
- 50-percent increase in the average number of new accounts per RM,
- 25 percent higher ADB (average daily balance) per new account.
- 40-percent reduction in the number of calls needed to convert a prospect.
Do you anticipate a permanent shift in customer utilisation of digital banking as a result of the pandemic and, if so, in which particular digital products or services?
We believe that digital is here to stay. We think that once you go digital and experience its benefits, it’s hard to go back to the old lifestyle of lining up and waiting for hours in branches. We believe that there will be greater adoption in the areas of digital account openings, payments and fund transfers because these are the transactions that can be done online, especially now with the rise of e-commerce and the digital economy.
What do you consider to be UnionBank’s most significant objective over the next 12 to 18 months? And how will you go about achieving it?
Our vision has always been to be a digital trailblazer in the country as well as in the region.
Recently, we were voted the Most Recommended Retail Bank in Asia-Pacific and among the most helpful banks in Asia-Pacific. This was because of our efforts to assist our customers, the economy and our country during the pandemic, which would not have been entirely possible without our digital capabilities borne out of our five-year transformation.
We know that the pandemic has accelerated digital banking. While we have several years of head start in digital transformation, we are cognizant that other banks and fintechs will do the same as a natural tendency. Despite the crisis, however, we do not intend to slow down or even just maintain our pace. Rather, we will accelerate our medium-term plans and bring them forward to today, given the rapid rise of digital. In fact, in our recent strategic planning, our board supported and even mandated us to complete this acceleration to maintain our lead in the industry.
UnionBank is going full throttle in our digital transformation. The bank shall compress its five-year plan into two years by accelerating the digital onboarding of new customers. Our success today has been a product of looking ahead into the future and preparing for the evolution of banking.
With the recent regulations, the bank is gearing up for the entry of more digital banks and the anticipated shift towards an open-finance environment. In fact, we are already setting up our own digital bank after the BSP (Bangko Sentral ng Pilipinas) approved our license application on July 15. The so-called Union Digital will be our vehicle to tap the large unbanked and underbanked Filipino population, anchored on a more cost-effective digital infrastructure.
We shall continue to launch pioneering solutions and test new technologies. We will continue to help “tech up” customers, partners, institutions in line with our Tech Up, Pilipinas aspiration, allowing all of us to weather this pandemic and emerge more resilient than before. Together, we can power the future of banking and help ensure the renaissance of our nation.
Those are certainly lofty ambitions, Mr. Bautista, but given UnionBank’s stellar track record, I am sure you will succeed in achieving them. Thank you for your time today.