By John Manning, International Banker
Today, the global banking industry is experiencing seismic structural change. Traditional, often-antiquated methods of doing business are now being rapidly replaced by new, cutting-edge forms of digital banking. In order to accommodate for this disruption, therefore, financial institutions all across the world are having to engage in sweeping overhauls of their business models, strategies and practices; indeed, everywhere one looks these days, one sees banks undergoing a digital transformation of some kind. But if there’s one bank that is going well beyond what constitutes a typical digital transformation and is blazing a trail of innovation that’s leaving its regional peers in the dust, it is Union Bank of the Philippines (UnionBank).
Headquartered in bustling and centrally-located Pasig City within Metro Manila, UnionBank, during the first half of the decade, had already earned a deserved reputation as a forward-thinking bank that was constantly pushing the tech envelope forward. But it was three years ago, after having recognized the existential threat of not seizing the initiative, that UnionBank decided to embark on its ground-breaking digital journey, one that sought to completely transform not only its own banking capabilities but what the industry as a whole could achieve. Today, that decision to transform appears to be wholly justified. With the aim of becoming “digital to the core”, the bank is succeeding in cultivating advanced and even entirely new ways of banking. It has been able to dramatically boost its customer experience, “future-proof” its business model well ahead of the competition and ensure that all of its staff are ably equipped to thrive in this brave new world.
And the exceptional results—and rewards—have flowed since then. Multiple awards have come UnionBank’s way over the last few years, ranging from prizes for its revolutionary Human Resources (HR) systems to recognition as one of the banking industry’s most respected—and most loved—employers. The bank even won the prestigious Digital Transformer of the Year award from the International Data Corporation (IDC)—an extremely rare feat for a bank. In the words of IDC itself, UnionBank “put substantial effort in integrating its operations fully with its digital innovations, putting information at the forefront of customer interactions and most of all, keeping its talent and manpower engaged in a digital way.”
Indeed, three years into its digital transformation, UnionBank has introduced a number of radically innovative solutions—both customer-centric and business-focused—that are fundamentally changing what it means to be a bank.
Among the most important solutions from the customer’s perspective is The ARK. Representing a major milestone in the bank’s path towards developing fully digital bank branches, The ARK was created to allow UnionBank customers to conveniently and confidently transition to digital banking. This is a task that some customers—particularly the older “non-Millennial” generations—were likely to consider a daunting prospect. To seamlessly achieve this transition, therefore, self-service functionality has been prioritized—there are no paper forms, documents or bank tellers in sight. Instead, customers are referred to a designated “branch ambassador” who provides assistance on how they can bank through their smart tablets and mobile phones. With more and more customers now realizing that many of their financial transactions need not be performed within the bank itself, The ARK has been successfully transforming customer behaviour and experiences in the process.
Indeed, “conversions” are being done every day. When a customer enters a branch, the branch ambassador will use the customer’s key performance indicators (KPIs) to provide further assistance to help them make the crossover. The bank has a checklist for this purpose—for example, is the customer signed up for the mobile app before he/she leaves the branch? And what has been the ratio of self-service to face-to-face transactions thus far? The bank, of course, will then guide the customer in the direction of the former rather than the latter. And the resulting numbers paint a vivid picture of The ARK’s success. More than 100,000 transactions have been processed by machines to date, including cash and check deposits, while more than 10,000 digital transactions have now been processed in-branch. Furthermore, more than 1,000 accounts have been opened with customers duly onboarded. Those are staggering numbers given the short timeframe.
UnionBank is on schedule to have 15 ARKs in place by the end of the year and intends to establish a further 30 in 2019. But the rollout to the rest of the country is not simply envisioned to be a “copy and paste” of the original model. Rather, in recognition of the fact that different communities have different specific needs and that things also need to be kept as flexible as possible, “ARK-lites”, which are scaled-down versions of The ARK, are also in the pipeline.
To boost exposure of The ARK concept, moreover, UnionBank has cleverly decided to host around two to three events in its branches per week. Although the initial plan was to curate the events and invite people in advance, interested parties have instead simply shown up, thus providing a clear indication of just how positively UnionBank’s plans are already being received throughout wider communities and how the ARK is transforming a Bank from a “transaction space” to a true “community space”. As people have arrived to use the space, they are “learning about our digital story,” Chief Customer Experience Officer Ana Delgado observes. And the decision certainly seems to be paying off, with 84 events already taking place, more than 500 new accounts and app registrations being recorded at these events, and at least 225 sign-ups approved for GlobalLinker, UnionBank’s online platform that connects businesses and start-ups with potential partners, suppliers, service providers and customers.
Another game-changing initiative is EON, a multi-platform digital-banking experience for customers. Relaunched last year, EON intends to redefine the user experience for banking, primarily through the introduction of a number of new, disruptive products that are changing the landscape of the sector, both in the Philippines and the wider Asian region. Since EON’s launch in 2017, UnionBank has introduced the EON electronic-money account – which are even distributed in 24-hour convenience stores, digital credit-card EON Duo and digital loan-offering EON Zero.
But it’s arguably the biometrics-based service “Selfie Banking” that has generated the most buzz. Through the EON app, customers simply have to snap a selfie to gain access to a wealth of banking services. This feature is the first of its kind anywhere in Asia. And EON is also about convenience, too. It is enabling banking and financial services to be extended to those without bank accounts; individuals can simply open an account by purchasing the kit and downloading the app, without having to go through bank branches.
Blockchain is also playing a hugely influential role in the bank’s digital awakening. Thus far, the most effective use case for the technology has been through Project i2i—a platform for rural banks to use blockchain to connect to each other. Interestingly, i2i was a co-creation with CONSENSYS and its co-founder, Joe Lubin, who is also a co-founder of ETHERIUM cryptocurrency. Already 100 rural banks have signed up for the project, with remittance payments and fund transfers being just a couple of highly anticipated applications the technology is expected to facilitate. What’s more, the participation of rural banks should help to significantly boost financial inclusion in the country.
The bank appears to be very bullish on what blockchain can achieve in the future. CEO Edwin Bautista describes the technology as “the perfect use case for disintermediation”, and as such, has been pressing the bank “to explore and experiment with use cases”. This positive attitude perhaps explains why, rather astonishingly, UnionBank has already set up its own Blockchain Institute, a place dedicated to teaching developers about blockchain coding, as well as real-world use cases and blockchain solutions, both cryptocurrency-related and otherwise. The Institute’s sign-up rate for this opportunity has been phenomenal. As Human Resources Director Michelle Rubio observes, “In four weeks, a hundred kids signed up. There were 500….we were able to get the hundred best. And now they are on another floor, learning in-house to code in various blockchain languages.”
And last but by no means least is arguably the bank’s signature innovation—its open application programming interface (API) platform. A clear first within the Philippine banking sector, the platform is allowing fintech firms, application developers and other third-party agency partners to connect their applications or platforms to UnionBank’s system functionalities. In turn, this is allowing the bank to support its partners by effectively operating as a “backroom” for them and thus freeing them up to concentrate on the front-end of their businesses.
The platform has been nothing short of a roaring success to date. The bank has developed more than 400 API endpoints, while the number of internal API calls has grown by more than 83 times since the platform was launched. Henry Aguda, the bank’s Chief Technology and Operations Officer and Chief Transformation Officer, highlights one of the most remarkable aspects of the platform as the sharp rise in the number of systems that can be integrated. “I think right now the pipeline is about 64, and our IT people are connecting left and right. We have one of the biggest API libraries in this region.” Mr. Aguda also acknowledges the fact that UnionBank still remains the only Philippine bank with an open-API platform that it uses inside and exposes outside, “so when technology really works, it creates competitive advantage.”
Indeed, that advantage is a big one. As the Philippine “pioneer-leader” in this space, the Monetary Authority of Singapore (MAS) last year invited UnionBank to be a Philippine “partner bank” for members of the ASEAN Financial Innovation Network (AFIN). As such, the bank serves as a “gateway” for ASEAN (Association of Southeast Asian Nations) fintechs to connect to the Philippine ecosystem.
But while it seems entirely appropriate to devote so many resources towards ensuring that customers and partners are fully onboard with the dramatic changes being implemented at UnionBank, it is at least as important that UnionBankers themselves are also on top of the developments taking place. And that’s where the bank’s Human Resources (HR) team is seen as a pivotal cog in the machine.
What is somewhat unique about UnionBank, vis-à-vis other banks undergoing similar changes, is just how highly the bank values the role HR plays within the digital transformation. Indeed, as a co-author of the transformation, HR is considered every bit as vital to the success of the overall strategy as perhaps more obvious divisions, such as Information Technology (IT). As the 2017 annual report noted, “UnionBank’s Human Resource Group fuels the Bank’s digitization strategy by driving HR services through digital means.” This is being achieved through a handful of distinct technologies that are taking HR capabilities into a new era.
The main platform is the bank’s human capital management (HCM) system, which houses the core database for the bank’s employees. It has enabled many of the most critical HR services to become operational, including performance and goal management, talent recruitment and onboarding, learning and development, succession planning, and updating of employee-data information. Its cloud platform, moreover, provides a convenient and highly usable interface for existing employees to access important information, resources and tools. According to HR Director Michelle Rubio, HCM is critically important for her division “because we are able to leverage on the information and use it to build capabilities and address the capability gap of going digital.”
Inspired by UnionBank’s highly successful customer-focused apps, an in-house app is similarly being developed to service employees. The One UnionBanker Hub is an employee lifestyle app designed as a “one-stop-shop” for all UnionBankers. It is loaded with unique functionalities that include applying for a loan, checking payslips, enrolling to training, and a host of other features that together delight the employees and create memorable UnionBank experiences. The app can even advise the line manager of the dates of an employee’s work anniversary or birthday. “So,” Ms. Rubio states, “it’s supposed to do everything.”
But more than just the technology being developed, it’s the underlying philosophy of the bank’s approach to human capital that is truly remarkable. Simply put, no one gets left behind. That’s the promise UnionBank is delivering to its employees, one which CEO Edwin Bautista has made to reassure all staff that they can be equipped with the necessary skills to be able to move into new jobs from ones that will disappear. The mantra is also a solid affirmation that the digital transformation should be led by the bank’s most prized asset—its people.
“It’s more than just a campaign promise,” Henry Aguda declares. “That’s what distinguishes us from the other banks and other companies. If we do this transformation, and we make it totally inclusive, then nobody gets left behind.” The Chief Transformation Officer is working closely with Ms. Rubio, HR Director, and Ms. Delgado, the Chief Customer Experience Officer, to make sure that the customers are in the centre of employees’ psyche. “Making people work agile. Making people work with one another. So, it is less about technology. It will come. It will follow.”
Being an early pioneer in digitisation is now also benefiting UnionBank significantly by enabling it to pursue additional important growth strategies and accomplish long-term goals. While other banks in the space are just coming to grips with digital banking, UnionBank’s transformation, well ahead of the curve, is now facilitating another key objective—to become a truly great retail bank. And by already having a full digital-banking proposition in place—where savings, investments and lending can all be done through the bank’s digital platform—this objective can now be realised.
In the last couple of years or so, key strategic acquisitions have been made that have allowed UnionBank to expand its market share and presence in the mass-retail space. This year, for instance, has seen its thrift-banking arm City Savings Bank (CitySavings) acquire PR Savings Bank, which is the 14th largest thrift bank in the country, and it is lending heavily to the motorcycle and agri-machinery sectors. The acquisition will boost CitySavings’ branch network throughout the country to more than 200, and it will widen the scope of lending offerings available to those two businesses. CitySavings also recently bought a majority stake in PeraHub (more popularly known as PetNet), which has the largest network of Western Union outlets in the country. The move is expected to greatly expand CitySavings’ existing loans-marketing partnership with PeraHub, in addition to boosting financial inclusion by leveraging on PetNet’s 2,800 plus locations in the country.
Ultimately, such acquisitions are helping UnionBank digitally enter new segments without losing its traditional position as a leading lender in the Philippine banking sector. By expanding its market presence, the bank is also helping to “tech-up” the Philippines and connect with the tens of millions of citizens who currently remain unbanked. As such, boosting financial-inclusion rates in the country is definitely on UnionBank’s radar during the coming months and years. And where it can’t make a positive impact directly, its recent moves are also supportive of the central bank’s infrastructure initiatives that seek to increase access to credit for individuals, the unbanked and MSMEs (micro, small and medium-sized enterprises).
But the digital transformation—and consequently, the current status of UnionBank—wouldn’t be anywhere near as successful, nor as highly praised, without sound leadership at the top. And undoubtedly, the captain of this “starship”, Edwin Bautista, has been the right person to steer the bank towards new and unprecedented heights. Formerly the Chief Operating Officer with a mandate to digitise the bank, launch the digital bank and partner with fintechs, Mr. Bautista ascended to President and Chief Executive Officer of UnionBank at the beginning of the year.
His aim of making UnionBank “the best digital-bank, ‘period’,” has inspired those around him to ensure that the digital transformation is executed to the highest possible standards. “Now more than ever, the entire bank is committed to our transformation journey. We are aligned towards one objective and towards our ‘moonshot’ aspirations. I thank the group heads for successfully cascading this to their teams.” And with accolades coming in thick and fast in recognition of Mr. Bautista’s leadership, he is now rightfully recognised throughout the banking world as a visionary, a thought-leader and an example for other banking leaders seeking to commence their own similarly transformative journeys.
In terms of assessing UnionBank’s progress in the three years since its digital transformation began, the cold, hard numbers are difficult to argue against. Virtually every performance metric in the transformation is showing solid growth. Its piloted robotic process automation (RPA), which is being applied to various internal processes, for instance, is slashing certain processing times and processing costs by a spectacular 80 to 90 percent.
But one might ask, has the time and resources expended in this massive transformation operation has significantly cost UnionBank financially in the interim? Absolutely not. On the contrary, the bank continues to consistently outmatch its industry peers in terms of profitability ratios. And in terms of standing within the Philippine banking sector, it has attained an enviable position—in addition to being the country’s top-ranked lender by return on equity (ROE) and return on assets (ROA), it is the seventh largest bank by total assets, the eighth largest by total loans, the sixth largest by deposits and the fifth largest by net income.
But the journey is not yet over. UnionBank is still hungry for more success; indeed, its over-arching vision is “to become one of the Top 3 universal banks in the Philippines, by building a bank of enduring greatness”. Although it may not be quite there just yet, the digital transformation has allowed the bank to take a giant leap in pursuit of its dreams. And given the scale, the quality and sheer audacity of this project, one can only conclude that it’s simply a matter of time before those dreams become reality.