UNION BANK of the Philippines (UnionBank) is set to launch a clearing system that connects rural banks through blockchain technology.
Dubbed as Project i2i which stands for island-to-island, institution-to-institution and individual-to-individual, the blockchain-based transaction and payment system will connect rural banks in a financial network.
In a press conference Monday, Ramon Vicente V. de Vera II, UnionBank head of financial technology and partnerships, said blockchain can push connectivity among rural banks, as most small lenders do not have the capability to join clearing houses as they conduct their processes manually.
“Other than that, it also has a power to make things more efficient and productive,” Mr. De Vera added.
Blockchain is a distributed data ledger which involves a large network of entities where data is stored in “blocks.”
The storage units are continuously updated and being secured using cryptography, making data management and data-driven processes decentralized, tamper-proof and more transparent.
Mr. De Vera said the platform will enable and streamline bank processes such as inter-rural bank funds transfer, financial and accounting reports, remittance, its know-your-customer process and branch locating, among others.
“One of the insights in the use cases we had was that an outgoing funds transfer — which normally took 26 steps — through the use of blockchain, the steps will be reduced to four,” Mr. De Vera said.
The network will also allow UnionBank to offer its universal banking products and services to rural lenders and their customers through the platform.
The Aboitiz-led lender said the pilot test of Project i2i is targeted by June 15, which will include five banks such as UnionBank, CitySavings Bank, Inc., PR Savings Bank, Cantilan Bank, and Progressive Rural Bank.
Mr. De Vera added that other financial institutions such as cooperative banks and remittance centers are welcome to the network.
In a statement, UnionBank Chairman Justo A. Ortiz said while the Philippine economy is growing at a rapid rate, data suggests this expansion is not felt by majority of Filipinos as they remain unbanked.
“UnionBank thinks Project i2i can serve as a catalyst to inclusive prosperity for 35 million unbanked in the country,” Mr. Ortiz added.
According to the Bangko Sentral ng Pilipinas, 554 out of the 1,634 cities and municipalities in the Philippines remain unbanked.
Previously, UnionBank said it is also poised to “blockchainize” some of its internal processes such as bookkeeping and distribution of its general circulars and operating manuals.
UnionBank, the ninth biggest commercial bank in the country in asset terms as of end-2017, logged a net profit of P2.9 billion last quarter, up 31.8% year on year. Its shares closed at P89 apiece on Monday, losing 10 centavos or 0.11%. — Karl Angelo N. Vidal