Making sure no one gets left behind: A drive for financial equality

Making sure no one gets left behind: A drive for financial equality

Some 70% of the Philippine adult population is still unbanked, but Dennis Omila, Chief Technology and Operations Officer, UnionBank, says change is coming – and fast.

Dennis Omila, Chief Technology and Operations Officer, UnionBank

At Union Bank of the Philippines (UnionBank), we’re extremely lucky to work within one of the fastest-growing economies in Southeast Asia, yet there is still a large amount of the population left underserved.

A recent analysis from McKinsey showed how a focus on commercial lending across the Philippines has left “a rapidly growing, increasingly affluent, and digitally savvy population with little access to financial services that meet their needs.”

For us, this isn’t good enough, especially given that around 70% of the Philippine adult population is still unbanked. Everybody, no matter their age, status or geography, deserves to have access to banking services that suit their needs. 

In 2020, we started working on a project to establish a seamless, fully digital experience that could scale up to meet the consumer’s needs.

Our priority was the availability of loans, given the ongoing demand from our customers. Statistics show that consumer lending in the Philippines accelerated strongly throughout 2022, growing 25.7% from the previous year – a number that will continue to grow consistently over the next decade.

Despite our good intentions, this project came with several hurdles we had to overcome, especially given that we needed to be able to quickly approve loans while at the same time assessing credit risk. 

The majority of consumers in the Philippines don’t have a credit history, so assessing the risk to the bank has historically been a challenge.

This is intensified by the fact that our credit scoring sources were previously limited to existing data and our internal underwriting processes were very manual, based on whitelist, or lead generation, matched with a paper-based approval criteria.

This meant that scoring could not be done in real-time, diminishing the overall customer experience and making it harder for consumers to access the financial help they need. 

To solve this problem, we researched what existing solutions were available on the market but realised that we would be better off creating our own in-house solution. This would help us avoid lock-in to an off-the-shelf solution, which would limit our ability to implement any changes depending on the specific needs of our customers.

We had a wider vision to transform not just our ability to offer loans in real-time, but all our existing legacy monolithic banking applications into a new technology stack flexible enough for other product additions. 

Before we did this, however, we needed to consider how we would address issues surrounding our existing solutions.

Previously, outdated legacy technology has typically slowed down our ability to bring new services to market. This challenge is also complicated by a lack of industry standards, meaning we have been restricted by the technical partners we can work with due to the technical language their products use. 

This is why we partnered with the Banking Industry Architecture Network (BIAN), inspired by their coreless approach to banking.

This approach to transformation empowers banks to select the software vendors needed to obtain the best-of-breed for each application area, including modern home-grown ones, without worrying about interoperability and being constrained to those service providers that operate within their own technical environment or messaging model.

By translating each proprietary message into one standard message model, communication between different actors is, therefore, significantly enhanced, ensuring that each solution can seamlessly connect and exchange data. 

Based on the BIAN models, we transformed our Retail Loans Engine to service the bank’s loan and credit products, leveraging its reusability and ease.

Our new solution allows 24×7 digital access to loans, so applicants don’t have to go to a physical branch and fill out paper forms and can instead apply through the bank’s website or mobile app.

They can also be approved for a loan in 60 seconds or less. The system has been configured to instantly download money for approved applicants and even creates a monthly repayment system.

Our new capabilities have made us more competitive across the market because of our improved flexibility and the speed we can bring new services to market.

We were also able to simplify our enterprise architecture, reduce the cost to market, improve each API and event development and make better decisions – accelerating our digital transformation journey. 

To get around the credit history issue, the first wave of loans is currently only available to UnionBank commercial customers using the bank for payroll, which amounts to an average of 20,000 monthly customers.

This is a huge increase from the 3,000 monthly customers we were able to serve before the roll-out of this service. As a result, our revenue increased by 217% year-on-year.

Going forward, we’re working hard to ensure this service will soon be available to everyone.

We’re also looking to increase the overall use of BIAN across our different architectures. This will make support for open banking that much easier and allow us to easily integrate not just within the bank’s ecosystem, but also with those of our partners.

This initiative is one of the first we have taken and is something we’re immensely proud of its launch and progress. There are several learnings, however, that we will ensure are implemented and considered during other projects. 

When you’re building something, for example, it must be based on a plan and that plan should always follow a good set of standards to make it easily interoperable with other components, both internally and externally.

Doing any big change this way will also allow you to integrate more easily while removing the complexity in your architecture. This will give you the agility to move fast and easily respond to the needs of the customer, which will always be our ultimate goal.

As a nation, we have a long way to go to ensure that every consumer can manage their financial wellness, but we’re proud of the steps we’re taking to make this a reality.

Our overall digital transformation strategy isn’t to fully digitise and expect everyone to follow, we’re strong believers that no one should get left behind.

BIAN’s support is helping us to achieve this lofty goal. As an organisation, we’re fully aligned with BIAN’s values and admire their constant drive for innovation and the ability to fuel the future of the industry.

By joining BIAN, we know that we have a partner that will help us adapt as quickly as we need to better serve our customers – no matter their needs.

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