Aboitiz-led Union Bank of the Philippines is accelerating its digital banking business with a “better normal” strategy to attract new clients while they fasttrack development of online-only products and utilize blockchain solutions for real-time services.

UnionBank, which has styled itself as a digital bank pre-pandemic, is preparing to get a digital bank license from the Bangko Sentral ng Pilipinas (BSP) after the regulator released the circular a week ago. Based on this new bank category, only those with digital bank license can call itself a digital bank.

UnionBank president and CEO, Edwin R. Bautista, in a virtual briefing Wednesday said that generally, the regulation covering digital banks are acceptable but he would have preferred that the central bank has allowed for higher foreign ownership as UnionBank also want to go regional. Foreign individuals or foreign banks can own up to 40 percent of a local digital bank.

Bautista said the foreign ownership could have been more and there were suggestions to increase the shares of stock of qualified foreign banks. But at the moment, the 40 percent is “probably OK right now.” It would still “allow us to get a foreign strategic partner, but we may want to list it later on so if there were some leeway for us allowing more foreign ownership, that will improve the liquidity of the stock (and) it will allow us to list in other jurisdictions,” he added.

As for the P1 billion minimum capitalization for a digital bank, Bautista said he has no problem with this amount, but then “some sectors” which he said are financial technology companies or Fintechs, find this requirement “too big”. "For us, P1 billion is not a big amount, it’s very important that the players are adequately capitalized, so we support that,” he said.

Bautista said most of the banks or those that intend to apply for a digital bank license are in the preparation stage to either do it alone or in partnership with Fintechs. He said a couple of Fintechs are thinking of applying but they would need banks as partners. The secret, he added, is that “you don’t want to do this by yourself.”

With an increasing dependency on digitalization, Bautista said there are no plans to build additional brick-and-mortar branches. “Eventually when we have our full-fledged digital bank, we can partner with a regional player … (digital) changes the playing field.”

The bank has 3,000 new and purely-digital accounts' opening a day and real transactions total 1.5 million a day, and these include bills payment, and its app-based, blockchain-enabled distribution of government securities, among others.

To improve on these numbers more, UnionBank has embarked on what Bautista call the “better normal” that includes faster development and testing via DevSecOps or the combination of IT and software applications.

“We will accelerate customer acquisition and onboard them on digital channels,” he said. These channels include online for retail customers, business banking app for MSMEs, the portal for corporate clients, EON for the mass market.

The “better normal” strategy also includes UnionBank’s continued use and exploration of blockchain solutions, and to leverage on data science and artificial intelligence or AI for customer engagement, said Bautista.

Bautista said he remains confident UnionBank’s bottomline in terms of profits and portfolio quality will be more or less the same, pre-COVID-19. Some of their corporate clients, for example, has prepaid their long-term loan to take advantage of low interest rates and since with the pandemic, most opted to defer expansion plants.

In terms of bad loans and provisioning, it will depend on how their December numbers would look like after the 60-day mandatory debt moratorium has ended. “We are watching very carefully how the NPLs (non-performing loans) are moving. December will be important for us banks because that’s where they emerge from the grace period,” said Bautista.

“All the banks naturally are worried (but the) important thing is you are able to remind customers of their debt. A lot of customers have some kind of misunderstanding (about the debt moratorium),” he said. “You might think people understood what the moratorium (was all about) but some people misunderstood it.”

Bautista also stressed on the importance of reaching out to these customers and “work on” payments that are doable. “You have to come up with a flexible restructuring deals with customers. (What happened was) they don’t have to pay for those two months (60-day grace period under Bayanihan 2) but they need to pay it by December. You’re going to pay three months in one month but the bank reserves the right to restructure it and have a payment term that is better than that.”

“The secret is to proactively talk to the customers and tell them that look, you have different options and which option do you want to avail (of),” he said.

To lessen the number of anxious borrowers and stressed bank employees, Bautista strongly suggest that clients should answer their phones when their banks are calling them. “We are here to help you. If you do not answer us, we cannot help you,” he said. “The BSP has given us a lot in terms of leeway on how we can restructure debt so together, let’s take advantage of it. I don’t want to take over your house. Keep your house. We don’t want foreclosure,” said Bautista.