Union Bank embraces digital banking

MANILA, Philippines - His marching order was short and sweet, to transform the Union Bank of the Philippines into a digital bank.

As the new president and chief operating officer of UnionBank, Edwin R. Bautista, means doing it in the soonest possible time to meet its desire to be among the top three banks in the country.

Fortunately, the culture for innovation is rich in the bank of the Aboitiz Group of Companies, having embraced technology as far back as nearly two decades ago.

“We are fortunate to have a chairman who is tech savvy and a firm believer of innovation,” Bautista said of Justo A. Ortiz.

Bautista said banking today is threatened not by fellow banking institutions but by non-banks.

It used to be that non-banks posed a challenge to banks on the credit side. With digital technology however, non-banks have now encroached in the payments franchise.

“We should also start acting like a fintech,” the former UnionBank senior executive vice president said.

Fintech, or financial technology, is a line of business based on using software to provide financial services. It disrupts existing financial systems and corporations that rely less on software.

The idea behind increased adaption of digital banking is faster, safer, efficient and convenient bank operations, especially backroom, enabling straight-through processing, automating and digitizing a number of repetitive, low-value, and low-risk processes.

Likewise, process apps, for example boost productivity and facilitate regulatory compliance, while imaging and straight-through processing lead to paperless, more efficient work flows.

As an example, the bank president said people are now purchasing and making orders online or on mobile devices.

It takes just a few minutes to make orders or purchase through digital devices without having to leave home or office.

Digital banking draws on big data and advanced analytics to extend and refine decision-making.

Analytics are being deployed for sales, product design, pricing and underwriting, and the design for truly amazing customer experiences.

In a study by global consulting firm PriceWaterhouse Cooper (PwC), 69 percent of global customers already use the Internet to buy financial products, and that they are willing to pay for digital banking.

The findings also show that digital banking will soon overtake branch networking as the preferred channel for customers to interact with their banks.

It shows the bank customers classified as Gen Y are the leading users of online and mobile banking channels, followed by Gen X, baby boomers and matures.

This is particularly true in the Philippines where majority of the population fall under the 15 to 36 years of age segment (Gen Y and Gen X).

It is these generations that have started earning money, learned to use digital technology to use banking and financial services, in other words, become the important and active bank customers.

Local bank executives said the road congestion has only heightened the importance of customer banking convenience, and mobile digital banking is the answer.

“No more visits to the bank branch, rather seek the nearest automated teller machine, go to stores with point-of-sale terminals, or use their laptops, tablets or smart phones to do the bank transaction,” they said.

McKinsey & Company said consumers around the world are quickly adopting digital banking.

“Incumbents only have a short period to adjust to this new reality or risk becoming obsolete,” the prestigious global management and consulting firm said.

The forecast is that within the next three to five years, digital sales may account for over 40 percent or more of new inflow revenue.

McKinsey said digital would touch every aspect of banking operations, from product development to risk management and human capital management.

With that in mind, Bautista said the bank would immediately digitalize bank operations especially backroom like straight through processing, 24/7, hand-in-hand with digitalizing customer experience.

“It is not a question of whether we will follow suit, but it is a question of how fast we can be one,” he said.

UnionBank has been hiring talent to ensure faster embrace to the digital banking culture.

They hired “disruptor” and risk management experts so the bank will not only think like one, but also anticipate how other banks will try to disrupt competitor banks.