UnionBank to use blockchain technology to help rural banks

By Karl Angelo N. Vidal, Reporter
UNIONBANK of the Philippines is embracing the blockchain technology as the lender plans to use the “disruptive” system to connect rural banks and increase the efficiency of its internal processes.
During its Tech Up Expo in Taguig City on Thursday, UnionBank said it will be working with rural banks to use the blockchain technology to connect the small lenders.
“The idea to connect the rural banks is not new, but we feel like the technology has arrived… To connect them in this kind of manner will benefit not just the rural banks but the communities they serve as well,” Ramon Vicente V. De Vera II, UnionBank’s head of financial technology and partnerships, told reporters on Thursday.
In a statement, UnionBank noted most rural banks, despite being in the position to spur development in the communities where they operate, lack the information technology system to be connected with other banks and the big financial entities such as the Philippine Clearing House and the SWIFT Network.
“This unfortunate development has prompted UnionBank, a firm believer on the power of technology, to push blockchain to help some rural banks,” the Aboitiz-led bank added.
Henry Rhoel R. Aguda, chief transformation officer of UnionBank, said that blockchain will solve the connectivity problem of the rural banks in an efficient and affordable manner.
“You can actually solve using older technology, but would you be able to solve it at the right cost level? It has to be efficient and affordable for the rural banks,” he said.
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.
Aside from applying the technology to connect the rural banks, UnionBank is also poised to “blockchainize” some of its internal processes.
“We take a look at the process[es] of the bank… above 700 different applications, and many of them are right for conversion into the blockchain [technology],” UnionBank President and Chief Executive Officer Edwin R. Bautista said.
Mr. Bautista added that the bank will first adopt the technology by putting its general circulars and operating manuals into the blockchain, enabling the more efficient distribution of the materials to the bank employees.
“The bank operates on operating manuals. Almost every process in the bank has an operating manual, and every time the central bank revises its rules, you have to revise your manuals as well. How does [the employee] keep track all of those instructions? We decided this is a perfect application of the blockchain,” Mr. Bautista said in a mix of Filipino and English.
After this, UnionBank will also apply blockchain to the rewards program of one of its credit cards, and is looking at using the technology to other processes such as cheque clearing, account opening, and funds transfer, among others.
According to the latest central bank data, UnionBank was the ninth-largest commercial bank in the country in asset terms with P556.08 billion as of end-December.
It booked a net income of P8.4 billion in 2017, down by 16.9% from the P10.1 billion in 2016, despite positive recurring income across all its business segments.