Poised to become fully Cloud enabled financial institute in the country.
A number of media outlets have reported that is aiming to become the first financial institution fully operable on the cloud in its home country.
UnionBank is a legacy AWS customer, and kicked off a transition to the cloud in 2018. The financial institute and the Philippines’ Securities and Exchange Commission (SEC), the banking industry has been receptive to and proactive in its use of new technologies to meet the changing needs of its clientele and make a difference in the lives of customers through smarter banking.
But for rural banks—a key Philippines banking segment—a lack of resources and inclusion with larger banking institutions have made it nearly impossible to thrive or even survive. The challenges rural banks face leaves a large majority of rural-based Filipinos with little or no banking access to conduct transactions, which include receipt of the remittance payments that account for up to 10 percent of the Philippines’ GDP.
The intersection of blockchain and banking
UnionBank is a pioneer in its use of blockchain technology and along with the BSP, it looks to use emerging technology to drive future banking practices and inclusivity in the Philippines, said Ramon Vicente V. de Vera, head of the FinTech Business Group at UnionBank.
“There are about 500 rural banks in the Philippines with a total of 2,600 branches, and they’re not connected to each other or a banking payment system,” he said, “Given their size and resources, they’re often considered second or third tier and are excluded financially.
We felt the social impact we could have by building a blockchain platform to connect rural banks to each other and to individuals would be profound for the Filipino population and banking industry.”
At the time UnionBank turned to ConsenSys, an AWS Partner Network (APN) Advanced Technology Partner, to build a blockchain solution that offers rural banks a new way of doing business to drive growth, sustainability, and increase banking access for its citizens.
In January 2018, a team of UnionBank and ConsenSys employees flew to the municipality of Cantilan, in the province of Surigao del Sur in the Philippines. There they got a first-hand look at the challenges faced by a rural bank seeking to serve a population in which up to 70 million individuals who have no bank accounts or easy access to banking.
“The Cantilan bank experience was eye-opening for both of our teams,” said de Vera. “The Cantilan bank quickly came on board as one of five initial rural bank participants in a pilot to test the use of a remittances platform built using Kaleido on AWS.”
ConsenSys and UnionBank kicked off the aptly-named Project i2i to drive institution-to-institution, individual-to-individual, and island-to-island financial connectivity and domestic remittances, Project i2i introduces a domestic remittance network using tokens on a private blockchain platform.
Rural banks have shouldered the burden of manually processing tasks for domestic remittances and BSP compliance however they must perform the same compliance tasks as commercial banks, even with fewer personnel and information-gathering resources.
According to the BSP, about 80 percent of all rural banks have little or no integrated computerized systems for their core banking processes, while some have no systems at all. Project i2i’s blockchain-based processes will free up rural bank employees to serve more customers, rather than having to process back-office transactions and administrative tasks.
“We are leveraging blockchain to create this decentralised, cost-efficient, and near real-time network allowing for the execution of domestic payments that don’t rely on existing infrastructure and intermediaries,” said de Vera. “This will improve our clients’ experience and boost our local economy because they can now use trusted community banks to execute remittances faster and cheaper, instead of using pawn shops and other non-banks and paying unnecessary fees. And as an example, we can now move from more than 20 steps to execute a domestic remittance to than five or less.
“This result supports UnionBank’s goal of helping the rural institutions drive operational efficiencies and save costs in accepting and processing domestic remittances, with UnionBank initially facilitating the final settlement of remittances. As part of the project launch, ConsenSys and UnionBank began training rural banks on the technology and then onboarding participating banks for its pilot. The pilot launched with five rural bank participants in early June 2018.
Currently Union Bank deploys the AWS’ Simple Storage Service (S3), Glacier, and AWS Marketplace platforms.
