There are now six digital banks in the country, competing to snatch the majority of Filipinos who were born into the information age and others who were forced to be tech-savvy by the pandemic.
The numbers present these banks a lot of opportunities to grow their client base, with 70 percent of Filipinos in their adulthood and 84 million internet users in the country, according to the Philippine Statistics Authority.
To emerge as the country’s top digital bank, UnionDigital Bank, a subsidiary of Union Bank of the Philippines and Aboitiz Group, is maximizing all its resources to realize what is seemingly impossible under the leadership of its president and CEO Henry Aguda.
“My aspiration now is to provide banking to every Filipino out there. It’s not just to overseas Filipino workers and others with moderate income, but also those without a source of income,” he told The Daily Tribune on its show Gising Na!
“Out of around 400 digital banks in the world, only 20 percent of them earn profits within two years and a half on the average. However, an Indonesian bank was able to achieve that faster in one year and a half. We plan to surpass that record,” Aguda added.
UnionDigital aims to tap P10.5 million clients of Union Bank and other millions of Filipinos by leveling up its use of artificial intelligence and partnerships with the government and other businesses.
“Offering loans to those with limited income is challenging, but we’re finding a solution with the help of the government,” Aguda said.
AI records and organizes data gathered from online activities, such as in e-commerce, social media, Google surfing, and mobile apps.
“We have an AI technology that tells us a customer segment is risky even before we lend money to that segment and without relying heavily on credit history from other banks,” Aguda explained.
Financial technology group Fintech Alliance of the Philippines in its partial 2023 report says e-payments is the service being offered by most or 37 percent of 285 digital-focused financial firms in the country. Lending comes second, with 20 percent of the total firms offering this service.
However, Aguda said accessing loans is life-changing as clients can obtain bigger loan amounts in the future to own a home or business for passive income and employment opportunities for others.
“E-wallets are not enough to fulfill other important needs in life. We should grow our money for other expenses. When you start from the base and start building your credit record, you can upgrade from a sari-sari store to motorcycle or taxi service,” he stressed at the The Daily Tribune’ Asian Innovation Forum last 29 August.
To reach capable borrowers, Aguda said UnionDigital partners with other lenders and businesses in various industries like the motorcycle ride-sharing firm Angkas.
Moving forward, Aguda said the digital bank will launch its small business loans in October to cater to micro, small and medium enterprises or MSMEs.
“Angkas already have histories of their driver-partners income levels. These drivers can become among the MSME owners who are just starting in the business and don’t have annual financial statements which traditional banks require,” he said.
UnionDigital aims to provide business owners with instant cash to ensure they scale up their operations to satisfy more customers. “With instant cash, you won’t miss a business opportunity. Our dream is that you move up,” Aguda said.
Within the horizon, the digital bank executive said there would be tie-ups with digitally-focused firms also in the services sector.
“We can integrate our services in another online platform like a medical app and display a button there of UnionDigital Bank. Then, borrowers can simply click that button to avail of our services,” Aguda said.
The Bangko Sentral ng Pilipinas is also key to ensuring Filipinos obtain various financial services easily under its three-year project called Open Finance Framework.
Launched in 2021, the framework requires traditional and digital banks and e-money issuers to submit financial data and undergo tests for building a banking system where lenders can interoperate easily and provide affordable products and services.
UnionBank also opened its Innovation Campus on a one-hectare property in San Pedro, Laguna to develop digital products and services in partnership with the Asian Institute of Digital Transformation and Global Learning Solutions Singapore.