Interview: Blockchain to Expand Reach of Banking Services in Philippines – UBP Chairman

We discussed the capacity of blockchain to solve accessibility issues in the Philippine banking sector with UBP chairman Justo Ortiz.

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Blockchain provides a solution to the many challenges for providing financial services to the millions of Filipinos who remain unbanked because of various reasons, Justo Ortiz, UnionBank of the Philippines (UBP) chairman of the board said in an interview with  Cryptovest.

Ortiz made the statement in reaction to a recent survey by the Bangko Sentral ng Pilipinas (BSP), the country’s central bank, that at least 75% of Filipino adults do not own a bank account.

“That is the main reason why we do blockchain,” Ortiz said when asked how financial institution will solve the issue of the unbanked number of Filipinos. He added, ” We’re doing AI. We’re doing now robotic process optimization that started back. And we’re preparing doing data analytics. So that’s the trail of sort of technologies we need to get to.”

He explained the BSP survey showed that 60% of the 54 million unbanked adult Filipinos are unable to benefit from banking services because they don’t have enough money to save. Further 23 million cited other reasons for not owning a bank account.

In its 2017 Financial Inclusion Survey (FIS) the BSP also said that Filipino adults saved more and borrowed less in 2017. The percentage of adults with savings increased to 48% from 43% in 2015, while the borrowing decreased to 22% from 47% in 2015. The share of borrowers obtaining credit from informal sources declined significantly to 40% in 2017 from 72% in 2015.

“While formal account penetration remains low and growth is modest, there are opportunities for greater financial inclusion enabled by digital technology. At present, accounts are still underutilized for payment and remittance transactions. Among account owners, only 18% are receiving salary, 12% are sending/receiving money, and 6% are receiving pension through their account.” according to the survey

In addition, nearly nine out of 10 adults have payment transactions, of which 60% are paying in cash. Over the counter remittance transactions prevail among senders and receivers of money as 93% used remittance agents to send money, while 83% used them for receiving money in the past six months.

“Digitizing these payment and remittance transactions is a crucial step towards digital financial inclusion”, the survey concluded.

Mass adoption

Ortiz suggested that one way of accepting the challenge is through the mass adoption of technology. Blockchain should be utilized to lower the cost of banking and making the services more accessible to the users.

This means, introducing solutions helping even those who are not tech-savvy but who have access to mobile phones to enjoy the services offered by financial institutions.

“If we have more mobile banking, or more self-service like this branch (the Ark branch) and everything is on the cloud, it would drive costs down a lot. The second thing is the experience. So that level of people will appreciate banking. We can’t deliver to them, they are not even here now,” Ortiz said.

“We are not in the places where those people are. So right now, they’re not even a target market at all.  But that doesn’t mean we can’t do anything about it,” he added.

Project i2i

In May UnionBank unveiled Project i2i (Project island-to-island), an Ethereum-based blockchain initiative for real-time retail payments, involving five rural banks as a pilot.

The project was launched in Davao City jointly with Cantilan Bank, PR Savings Bank, City Savings Bank, FairBank, and Progressive Bank. It aims to bring millions of unbanked Filipinos to the financial system by connecting rural banks to the country’s main financial network. It runs on ConsenSys’ Kaleido platform designed to speed-up and simplify the process of using blockchain technology.

Through the platform rural banks will have access to the main banking network, which allows them to perform key banking transactions that universal banks do. Looking further ahead, Project i2i aims to cater to other sectors including cooperatives and sari-sari stores.

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