3 Dec 2018, 08:53 — 12 min read
Unlike other banks that are going digital as a defensive strategy, UnionBank is embarking on full digital transformation to grow rapidly
Occupying four of the 10 gigantic halls of the 100,000-square-meter Singapore EXPO, last week’s third edition of the Singapore Fintech Festival (SFF) is huge by any measure. Sponsored by the Monetary Authority of Singapore, the city-state’s central bank, the SFF is the world’s largest gathering of financial technology startups, entrepreneurs, policy makers, investors and academics.
For the almost 500 exhibiting companies, the challenge is how to stand out and attract the attention of an estimated 45,000 participants from 130 countries congregating over three days in Singapore’s largest exhibition and convention center.
Participating in the event for the first time, the UnionBank of the Philippines didn’t just rent space for a booth, which is what most corporate exhibitors did, but put up one of only 16 country pavilions.
Much bigger and taller (and presumably costing more) than the regular corporate booth, the pavilions were usually put up by a country’s industry association or government body. The larger-than-usual stall showcased not one but several companies, which perhaps shared in defraying the cost of renting premium exhibition space.
For example, the neighboring India pavilion was set up by the Federation of Indian Chambers of Commerce and Industry (FICCI) in partnership with the High Commission of India, Maharashtra IT, and Government of Maharastra. It featured 18 companies. Similarly, the Japan pavilion was sponsored by the Japan External Trade Organization (JETRO), a Japanese government-related body, and featured 12 Japanese companies.
Unlike other country exhibitors, UnionBank had an entire pavilion to itself. It featured nine of its newly developed products and services, including UnionBank GlobalLinker, a digital platform that makes doing business easier for small business owners; Project i2i, which aims to connect rural banks to the country’s electronic banking network; and XLOG, an online platform that will help businesses link up with global shipping and logistics providers.
And thanks to a brightly lit circular digital billboard above, the bank had no problem drawing the crowd’s attention. It maximized the digital screen to the hilt, changing the display from UnionBank’s signage to timely messages, such as welcoming Indian Prime Minister Narendra Modi when he visited the India pavilion next door.
Even more remarkable are some of the people manning the exhibit itself. On hand to personally entertain visitors, answer their questions and explain the featured products and services are no less than UnionBank Chairman Justo Ortiz and President Edwin Bautista. Both stayed for the three-day duration of the event, and didn’t just pop in at the start for the photo op like what many busy company CEOs are won't to do. True to startup form, Ortiz, slugging a backpack, was just wearing a jacket over a black t-shirt emblazoned with the words “TechUP,” the bank’s branding for its financial technology products.
“We’re both here and left the bank in the Philippines in the care of other managers because this is more important,” explained Bautista when Entrepreneur Philippines caught up with him at the SFF. “This is the future.”
Indeed, the UnionBank CEO believes his and the chairman’s willingness to man exhibits in globally important events such as the SFF is a unique strength of the bank. “Where else can you see the bank chairman and CEO manning booths? At the end of the day, that’s our competitive advantage,” he added. “Other banks can follow and copy our products but will you see their top executives manning booths at events like these?”
It’s a practice that the bank emulated from some of the world’s leading startup founders. “What inspired us is two or three years ago, we attended a fintech event and people manning the exhibits were the founders of the startups themselves,” Baustista recalled. “That's how we met Joe Lubin, the co-founder of Etherium. He was manning the booth! It tells you whether they are serious about it or not.”
But UnionBank executives picked up from startup founders more than the informal dress code and readiness to man exhibition booths.
“From the beginning, we were emulating the speed of fintech startups and combining that with the reliability of a bank,” said Bautista. “We found out their secret is agile methodology and scrum teams,” which refers to the way a tech company assembles a group of programmers to deliver a requested software or application to a customer in increments.
Bautista, a mechanical engineer by training but who worked mainly in marketing and product development in Procter & Gamble and Citibank, said scrum teams reminded him of project management teams of old except the current versions worked a lot faster. “Back in the day, it took you six months to launch something new,” he said. “Now, you rolled out a minimum viable product and you iterate every two weeks. It’s perfect for banking because the products are digital.”
Relying on several scrum teams, UnionBank was able to roll out several digital banking products and services, including EON, an upgraded and fully digital banking platform that introduced “selfie- banking,” a first in Southeast Asia, allowing clients to log into their accounts by posing in front of their smartphones instead of typing their passwords; Rafa, a next-generation banking chatbot that can answer detailed client-specific questions and not just pre-set queries; and the ARK, the country’s first fully digital bank branch that does away with queuing and waiting. In addition, the previously mentioned products and services displayed at the UnionBank’s pavilion at the SFF were also developed by these scrum teams.
Apart from agile approach used by its teams, Bautista credits the bank’s strategic decision more than two years ago to go “all-in” and embark on an end-to-end retooling of systems towards full digital transformation for the rapid development and deployment of its digital innovations.
As the first bank to put up a website and introduce online banking, UnionBank is no stranger to digital technology. But digital transformation is different, said Bautista.
“We’ve always approached it per product before; now, there’s a commitment to change the entire back-end towards digital to the core,” he explained. “The problem with per product approach is that you can only innovate so much. Eventually, you’ll face a dead-end because of the limited capability of your back-end systems, for example, if you try to do straight-through processing,” referring to transactions that flow seamlessly from a client’s device to the bank to the clearing house to a different bank and then back to the phone all in a matter of seconds.
Unlike its bigger counterparts, UnionBank is not burdened by legacy mainframe-based information systems, facilitating its digital shift. “We were one of the early banks who chose to go open system. Others are still reliant on mainframe computers,” he explained. “They can still introduce digital products by layering transactions on top of mainframe but that means doing it through batch processing whereas the new open systems can do it real-time.”
Thanks to these innovative products and services, UnionBank has cemented its leading position in digital banking in the Philippines and the region. In 2017, the bank was named by Euromoney the “Best Digital Bank in the Philippines” for its EON online banking platform. That same year, HK-based The Asset magazine gave it the “Digital Bank of the Year” award in the Philippines. It was also honored as the “Most Innovative Bank of the Year” at the European Global Banking and Finance Awards. Its EON app won the distinction as the “Best Mobile Banking Project” from the Asian Banker magazine during its Philippine country awards.
But the real test is yet to come. Unlike other banks that are going digital as a defensive strategy, UnionBank is embarking on full digital transformation to grow rapidly and catapult itself from its position as the Philippines’ ninth biggest lender by assets to the Top 3. With only 300 branches compared to over a thousand branches of each of the three largest banks, it will take a long while for UnionBank, which has only Php559 billion in assets, to catch up with the three biggest banks’ asset base of Php1.7 trillion to Php 2.7 trillion.
“If we fight them the old-fashioned way, I’ll be retired and with grandchildren but we haven’t caught up with them yet,” said the 58-year-old Bautista. “But if the rules of the game change, we have a fighting chance. Already, the world’s largest accommodation provider doesn’t even own a single hotel room and its biggest ride provider doesn’t own a single car.”
In pursuit of its digital-powered growth strategy, UnionBank is furiously engaged in building online and mobile platforms, communities and entire ecosystems to attract and engage with tens if not hundreds of thousands of users that will eventually become bank customers.
“Facebook is an ecosystem, Amazon is an ecosystem, WeChat is an ecosystem. The world is already moving to ecosystems, many just don’t recognize it yet,” Bautista explained. “And initially they didn't make money.”
So far, the prospects look good for UnionBank. Users of its GlobalLinker platform, for example, grew almost four-fold in the first ten months of the year from only 6,000 at the end of 2017 to 23,000 by end-October. Of course, not all of them will become customers but Bautista is confident a sizeable number will sign up as bank clients.
Meanwhile, even UnionBank’s presence at the Singapore Fintech Festival seems to be paying for itself, helping generate new if unexpected business. Entrepreneur Philippines’ scheduled interview with Bautista was delayed by a few minutes because representatives of an Australia-based bank chatted with him to explore a possible partnership in the Philippines.
“They need a local partner for their corporate clients in the Philippines,” he shared. “They said, ‘We don't want to deal with paper, we want open API (application programming interface) and based on what we've seen, you’re the only one capable of doing it.’ The COO was here and told the transaction head to close a deal. It just took a 10-minute chat, a handshake and next week, they’ll be coming over to Manila.”
That’s just one deal but it confirms that UnionBank is headed in the right direction. It will need many more small and big wins like that to power its rapid journey to the top.
Posted byUnionBank Publication
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