Banking on the future: Digital services for people

Banking on the future: Digital services for people

Union Bank of the Philippines is leading the way in terms of banking innovation in the region.

Henry Aguda hasn’t always worked in finance. In fact, the charismatic banking whizz who is currently both Chief Technology and Operations Officer, and concurrently, Chief Transformation Officer at UnionBank, says that it was his experience as a customer, first, that led him to his career in the banking sector.

“I joined the bank five years ago. I'm originally a telco guy, but five years into the banking industry I could call myself an aspiring banker,” he laughs. 

Aguda spent his former years working as a merger of technology and finance, but mostly in the telco space. He then joined the bank and two years into the banking tenure, the board decided to create the fintech spinoff venture for UnionBank, which is UBX. Since then, he has been able to mix both technical and financial experience to create a unique banking subsidiary that is focused on creating technology innovation around financial services.

His innovative leadership within the bank, he explains, has been led by his experience as a bank user. “Well, let's just say I'm a consumer of the financial sector. In the olden days, I avoided going to the bank branch unless it was necessary. I don't like lining up, and like most people, I don't want to be signing documents.”

“As a consumer, what has attracted me most about this industry is that I know I can make an impact in terms of making people's lives easier If we apply the digital discipline appropriately.”

Technical innovation

Another aspect that has fed Aguda’s enthusiasm has been UnionBank of the Philippines executives’ willingness to embrace new technical innovations. In just five years, immense and groundbreaking changes have been implemented. These changes have not only digitally transformed the bank’s services, but also led to the ‘work-from-home mandate during the pandemic, operating seamlessly. 

Currently, Union Bank of the Philippines is known to be number one in terms of profitability, ranking top in terms of ROE and ROI. It is also one of the six biggest banks in the Philippines and has won several awards for its services and achievements.

Managing the pandemic

While many companies and organisations globally had crisis management strategies in place prior to 2020, the unexpected pandemic still managed to throw them into disarray. Having previously implemented innovative technology strategies to handle situations as wide-ranging as earthquakes, active shooters in the building, floods, and terrorist attacks, Aguda says the transition to the entire organisation working from home, was carried out with relatively few bumps. 

He explains, “In 2017, we started a massive shift to future-proof our business by using emerging technologies. We started retiring most of our desktop computers and started giving laptops to our employees. The world is a volatile, uncertain, complex, and ambiguous place even before a pandemic, and we’d prepared for everything from earthquakes, tidal waves, shooters in the building, and terrorist attacks. 

“We also went into an aggressive programme, giving cell phones with data loads to our employees. And we've created an infrastructure that is scalable as people start using the network. When the pandemic hit, it was just the right disaster that tested all of the readiness that we prepared for. So because of that, 87% of our people immediately were able to work from home, and they can work securely with VPNs and secured connections. This allowed us to ensure that our employees are working safely from their homes while we continue servicing the public.”

One step ahead of the curve

This forward-thinking approach has been applied to all areas of the bank’s services and is yielding extraordinary results. Indeed, Union Bank of the Philippines was the first regional bank to employ the use of enterprise architecture as part of its digital transformation process. Aguda believes this is the biggest innovation he’s brought to the table in terms of creating a better regulatory strategy in the banking sector.

Coming from a telco background, his skills were well-honed and he was surprised when he realised such systems were not present yet in the banking industry.

He explains, “The biggest innovation that I was able to bring to the banking industry was the use of an enterprise architecture that is standard and internationally accepted. It's called the Banking Industry Architectural Network. It was quite a surprise for me because I thought banks being highly regulated and standards-based, would already have the discipline locked in. But apparently, they hadn’t come across such a discipline. 

“So in joining the bank, while I was learning banking, I was also teaching my colleagues how a bank can be architected, such that it follows a digital template adopted worldwide.”

From there, Aguda orchestrated a technological revolution within the bank, shifting it to technologically innovative systems including AI and robotic process automation, among others. Recently there were also discussions on the metaverse and how UnionBank can use its architecture to explore ways of serving people in Web 3.0. 

Ultimately, says Aguda, the success of the transformation has been down to the willingness of executives to embrace technology and trust in the new direction. “I was lucky enough that the people I work with are all passionate and forward-thinking. They adapted to the new solutions quite easily.”

Addressing the unbanked

In 2019, according to an official financial inclusion study, an astonishing 51.2 million people in the Philippines were still unbanked. The pandemic has undoubtedly changed that - but in terms of addressing financial inclusion, the situation remains a challenge. 

In 2015, for example, the Bangko Sentral ng Pilipinas (BSP) set a goal to increase the number of digital payments in the country from just 1% to 20% by 2020. “They've exceeded that target and are hitting an estimated 30% in terms of digital transactions. We are still lower compared to our peers in the CN region, but we'll be at parity with them in one to two years’ time,” predicts Aguda.

In part, cultural attitudes to digital banking were responsible for a large number of unbanked people. “Some said, prior to the pandemic that people are used to traditional banking that they will never, never choose not to go to the branch. But then in the age of social distancing when you remove that option, people just gravitate towards what is available,” says Aguda, who recalls that in early 2020, there was initial hesitation in adopting more digital banking services, but once customers discovered how easy it was, the adoption level increased. 

“They realised that it was actually more convenient than the traditional channels. In order to open an account with UnionBank during the pandemic, you don't have to leave your house. You just have to download the app, take a selfie of yourself, take a picture of your government-issued IDs, and within three minutes, you already have a bank account.”

The pandemic and the ease of use were the biggest contributing factors to customers seeking digital banking alternatives. As Aguda points out, culturally speaking, such services have been welcomed because they have made moving money around so much easier for users. He also believes the pandemic has been instrumental in changing transactional behaviour in the Philippines.

“There's a lack of extended family in the Philippines, and there’s a cultural nuance where we take care of our extended families, whether they're living with us or living overseas, or in the rural areas. Because of that need, people had to adapt to the platform that allows them to extend their assistance to those extended family members.”

Cyber security and privacy practices

But as with all major digital overhauls, cybercrime is never far behind - and has been instrumental in toppling many large-scale institutions since the pandemic began. It has therefore been at the forefront of many recent discussions by leading banks and institutions. 

Union Bank of the Philippines has responded to the threat by creating its own cybersecurity operations centre which is so technologically innovative that it has now become part of the banking regulatory framework. 

“Years before the pandemic, we started making our own cybersecurity operation centre, which has now become a standard required by our regulators for the other banks,” Aguda says. He goes on to explain that as one of the first banks in the region to implement such a programme, the centre, which can be operated from three different continents, has proved remarkably effective.

“We've been consistently recognised by our regulator for the education campaign in the ‘privacy by design’ approach that we take with our systems. You have to be one or two steps in front of the criminals. Otherwise, they will eat your lunch if you snooze. So, that's the approach we’ve taken.”

He explains, “Privacy by design is a prescription by the National Privacy Commission. Everything we do from starting off an IP product check to creating a product, to creating an employee programme, has to be built into those programmes from day one, with data privacy protections, whether it's processes or technology implementation.

“Often, the problems arise because companies do an IP project or a product development and the privacy compliance comes at the end. In our case, nothing gets started until it has the approval of our data privacy group that says that we're building it according to data privacy regulations.”

Strategic partnerships and banking ecosystems

While Union Bank of the Philippines has worked hard to create a better climate for the region’s banks in general, it has also relied on the resources provided by a number of strategic partnerships. These working relationships have been critical to the bank’s success. 

“We value our strategic partners in the same way that we value our employees. We call them UnionBankers with a different company ID. AWS has been essential for our cloud infrastructure, Palo Alto for cybersecurity, VMware for the Virtual computing platform that powers the bank.”

He continues, “We collaborate with them in a partnership that is meaningful in the pursuit of a common vision. And for UnionBank, that common vision is financial inclusion for the broadest number of Filipinos in our country.”

The system appears to be working because Union Bank of the Philippines has been awarded best digital bank for several consecutive years. “We have the passion for continual reinvention. For example, we recently got our license for a full-blown digital bank that will be called UnionDgital. Our plan is to continue to reinvent the way digital banking is being done.”

Aguda explains that the bank’s backroom processes will be reconfigured to herald a new era in digital banking that is based in the metaverse - a new buzzword that has planted Web 3.0 or the spatial internet.

 “It's the merger of the physical and the virtual world. So Union Bank wants to be the first bank to plant its flag in the metaverse. We're now talking to gaming companies that provide play for pay as entertainment and e-sports, and looking at ways of how we could convert the crypto, immediately to fiat and fiat to crypto. Allowing gamers in the blockchain virtual world to easily participate in the traditional economies and vice versa. So, that's another exciting pursuit of UnionBank.”

Customer-first philosophy

The world of play-for-pay is where the future lies in terms of progress for Union Bank of the Philippines, says Aguda, who explains that play-for-pay gamers often struggle to get bank accounts. “And because they don't have bank accounts, the yield on their conversion falls and they end up paying huge transfer fees. But by providing banking services, their earnings are immediately accessible and offer them a way to improve their lives.”

This aspect concludes our conversation, a subject that is clearly a passion for Aguda. “What inspires me in banking today is the way that it is affecting people's lives,” he says. “If you give customers a facility that allows them to borrow money with competitive rates, nothing that would prevent them from repaying, that impacts people's lives. So that continues to sustain my interest in the banking industry.”

Ultimately though, it all comes down to creating better services for the bank’s loyal customers, whether that is for the unbanked or the latest armchair investors. People, says Aguda, are at the heart of the matter - and as a highly sociable person, he can’t wait for things to get back to ‘normal’ - even if digital transformation has been fun. 

“The first thing I'm going to do is to go out and meet people. I want to have proper meetings. I want to fly to other countries and see our partners and colleagues. Before the pandemic, we traveled a lot. It’s one of the few things I really miss. So engaging in the industry personally, with both people inside and outside of the Philippines, is number one on my bucket list.”


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