The Aboitiz Group’s Union Digital Bank (UnionDigital) will start its operations in the second quarter of 2022, according to a Union Bank of the Philippines (UnionBank) executive.
“We are looking at being able to launch UnionDigital by the second quarter of next year (and) we expect to grow our share in the penetration of the unbanked segment,” said UnionBank executive vice president Manuel Santiago Jr. in a forum “Gut Feel: Ensuring Sustainability of Food and Utilities” hosted by the Economic Journalists Association of the Philippines (EJAP).
The Bangko Sentral ng Pilipinas (BSP) approved UnionBank’s digital bank license last July, the first local and privately-owned commercial bank application that was approved by the BSP.
Santiago said they expect fierce competition in the digital banking business, especially from foreign banks. UnionBank is the fourth applicant to be granted digital bank license. The first is a government-owned bank, and the other two digital bank license was granted to a Singapore digital bank and a financial technology company, also from Singapore.
“Aggressive (competition) definitely we expect that,” he said. The digital banking market is new and there will be rivalries to get the most clients. But, Santiago said the market is also large enough since there is a still a huge unbanked population waiting to be reached by the banking networks, as branches or digital means.
“The main competitive edge of any digital player is their ability to be able to provide the service to their customers, and their ability to reach the segments that needs to be reached,” he said.
“We expect to grow our share in the penetration of the unbanked segment and we hope to be able to contribute to the BSP’s goal of achieving 70 percent of adult Filipinos to have a formal bank account. We’re looking at to be a major participant in achieving this goal of the BSP,” Santiago added.
UnionBank’s digital business, at the height of the pandemic, recorded high growths. Based on latest numbers, the bank’s digital accounts have increased by 767 percent, while usage of UnionBank online app expanded by 535 percent. Value of transactions also grew over 500 percent. “We’ve seen the constant increase, the monthly increases in digital account sign ups. We expect this to continue as we offer new services and target new segments of the market.
"We’re optimistic to be able to sustain this growth,” said Santiago.
As an expected major player in the digital banking space, UnionBank is prepared to be challenged by a fragmented market. “If we want a real financial inclusion, we need to be able to allow interoperability of the payments,” Santiago told EJAP members. This means one merchant will only deal with one payment channel since payments are interoperable. “BSP is on the right track with the QR Ph project where all banks are rquired to participate,” he said.
The BSP launched the QR Ph person-to-person (P2P) facility in 2019, before the pandemic. By next month (September), the BSP will bring out the QR Ph payments-to-merchants (P2M).
The BSP already pilot launched the QR Ph P2M via InstaPay last April for merchants and businesses. This facility will make the QR-driven payment streams into interoperable payment solutions by just scanning the biller or merchant’s QR and customers can make payments.
Still being developed, however, is the next in line or the QR Ph for payments to businesses (P2B) which will eliminate the need for merchants and customers to maintain several accounts and for merchants to display numerous QRs.
With the QR Ph and the digital banking framework, the BSP is hoping to migrate 50 percent of all payment transactions into e-payments by mid-2023, and for 70 percent of all adult Filipinos to have formal accounts in the same year. As of mid-2021, e-payments are already 17 percent of all payment transactions in the country.
The use of QR Ph has reached P1billion as of end-May this year.