RCBC: Enabling Financial Inclusion With FinTech Innovation

There's a conundrum in the Philippines that often halts the flow of progress: ‘We want digital transformation, but we don’t have 100% internet penetration or data access especially in the countryside’, says Lito Villanueva, RCBC Executive Vice President and Chief Innovation & Inclusion Officer. 

Pre-pandemic, 71% or 51 million adult Filipinos were unbanked, and only 10% used digital banking, according to the 2019 Financial Inclusion Survey published by the Bangko Sentral ng Pilipinas (BSP), the country’s central bank.

‘Many Filipinos already have little or no access to brick-and-mortar banking’, Lito says. ‘It takes so much effort that banking is the least of a low-wage worker’s concerns. They’re worrying about surviving day-to-day, instead of opening a bank account’.  

This is partly due to the geography of the Philippines. As an archipelago with more than 7,100 islands, many geographically isolated and disadvantaged areas (GIDAs) are hard to reach. 

‘Even being known globally as the most social media-savvy users, most of our islands are still not digitally connected’, says Lito. ‘But while the pandemic highlighted the importance of digital banking, it also underscored that we don’t need to have 100% of the resources at hand before driving transformation. We learned that it is a process, a journey which we can improve as we go along’. 

Pandemic-Era Banking 

With enforced physical distancing, due to the pandemic, Filipinos found that in-person transactions were nearly impossible. 

‘Physical banking, as we know it, mattered very little in the face of a disruption as huge as the COVID-19 pandemic’, Lito says. But this situation further marginalised the underbanked and underserved.

‘Though digital transformation was therefore inevitable, it did not simply mean moving our services to a digital platform. It also required fostering and strengthening strategic collaboration so we could continue
to reach and serve our customers’. 

Right at the start of the pandemic, RCBC led the first massive private initiative in order to disburse government aid to Filipinos nationwide. As of June 2021, the Bank has distributed in excess of US$319.9m (PHP16.13bn) in governmental financial aid to more than 4.5 million low-income families. That’s 22.83 million individuals in 73 out of 81 Philippine provinces. 

‘The fact is, digital transformation and financial inclusion go hand-in-hand’, Lito explains. ‘Pushing for digital transformation requires financial access for all, through innovative solutions powered by digital’. 

Going Digital 

So far, the results have been impressive. In June 2021, RCBC’s InstaPay and PESONet transactions increased by a respective 118% and 579% from last year. Cardless ATM withdrawals through its mobile app grew by 360%. In fact, during the pandemic, the bank onboarded more than 1.4 million customers onto its digital finance platforms. 

Starting with one per cent digital in 2015, the Filipino banking industry had aimed to reach 20% digital by 2020. Now, BSP predicts that by 2023, it will digitalise 50% of its transactions. That brings the country closer to its goal of including 70% of adult Filipinos in the formal financial system within the next two years. 

‘We revved up our online and mobile platforms,’ Lito says. ‘With health protocols in place, we created contactless transaction options in both the RCBC Online for our tech-savvy customer and DiskarTech app for the tech newbies. No need for physical banking’.

Here’s a quick rundown of some of the digital tech RCBC utilizes to push for financial inclusion: 

Cloud: This is the cornerstone of digital. It allows RCBC to launch banking apps and services with speed and scale

AI/ML: This bridges communications with customers and helps RCBC develop more responsive and hyper-personalized banking solutions

Facial Recognition Software: It onboards banking clients quickly and securely.

eKYC (Know Your Customer): This further strengthens data privacy

Chatbots: These enable digital banks to answer customer questions and process them much more quickly, 24/7 

‘The most effective technologies are those that make onboarding easier and attend to the needs of customers 24/7’, says Lito. ‘As personalised banking spikes, we need to make transactions frictionless, ready at warp speed, and available all day, every day’. 

Driving Financial Inclusion  

A major barrier to banking, especially digital banking, is language. 

‘Traditional banks tend to intimidate low-income customers with the way they present banking and the language—especially the banking jargon—that they use’, Lito explains. This leads to a divide. ‘Most traditional banks that pivot to digital still maintain the intimidating brand they project in their brick-and-mortar branches. But on the other hand, digital-first banks tend to target the digitally-savvy, young Filipinos that know the ins and outs of technology’. 

These tactics push away unbanked customers and make it more difficult for them to join the formal financial system. RCBC’s approach, through Lito’s team, was to streamline its digital platforms and make everything as intuitive as possible to ensure that all clients are served, across all segments.

‘We have RCBC Online and Mobile for the digital-savvy Filipinos, the ATM Go for those in remote areas, and DiskarTech for the unbanked and underserved, who are willing to try digital but are typically shut out of traditional banking’, Lito says. 

ATM Go 

RCBC’s solution for remote areas, its ATM Go option, is a handheld mobile neighborhood ATM. They rely on mobile point-of-sale (mPOS) devices that are deployed in partner retail stores, cooperatives, microfinance institutions, rural banks and other community establishments that rural community members can access to make cardless transactions within their area. To bring banking closer to them. 

DiskarTech 

DiskarTech is RCBC’s primary financial inclusion super app. In addition to eliminating jargon, it reduced the language barrier: the app’s user interface uses Taglish or the Filipino-English vernacular to explain its features, and now also in another major dialect, Cebuano. This allows the app to be more relatable and accessible to the mass market. It also offers one-stop financial solutions in a ‘sachet-type’ or trial package, such as, microfinancing, micro-insurance and even livelihood opportunities. 

Lito explains that, in the Philippines, most customers have financial goals that revolve around their families. So his team concentrates on showing people how banking can help provide a better life for them and those they love. Once individuals find this what—a better home, security, and opportunities for their families—relevant to their values, they’re eager to understand the how or specific ways banking can improve their lives. And if one family member starts to value banking and digital banking, others usually follow suit. 

‘This is especially true in remote areas’, Lito says, ‘where families rely on each other to help uplift their lives’. 

At present, DiskarTech has more than 4.2 million downloads and over 3.01 million registered users—and eight out of 10 of its most active users are from more remote provinces. ‘Yes, they had to shift to mobile banking because of the pandemic’, Lito says. ‘But if we remove the barriers that make traditional banking intimidating, they’ll continue to use it’. 

Since his team launched DiskarTech, it’s successfully reached the most customers out of any Filipino bank through a digital platform and served customers from all 81 provinces. 

Giving Access to the Unbanked 

While there’s no data yet for the past year, the number of banked adult Filipinos is steadily rising. The region’s most recent financial inclusion survey in Q1 of 2020 showed that from 2017 to 2019, the number of Filipino adults with formal financial accounts increased 6%—which translates to five million new customers. 

‘The banked population of the Philippines continues to grow in number’, Lito says. ‘The BSP’s digital acceleration initiatives and our efforts have paid off’. 

Digital banking continues to grow:
Total deposits grew by US$24.2 billion in a single year—from US$270.7 billion (PHP 13.648 trillion) to US$294.9 billion (PHP 14.869 trillion). 

More Filipino customers are saving money: In September of 2020, deposits increased by 3.86%. 

Lito looks up. ‘What we’ve learned across all segments of clients—from the mass affluent to the mass low-income market, the urban and the rural, the boomers to the millennials and the Gen Zs, is this: they are willing, even enthusiastic, to try new technologies - as long as we make it simple, easy, and accessible for them’. 

Lito Villanueva is the Executive Vice President and Chief Innovation and Inclusion Officer for RCBC. Mr. Villanueva also serves as the Chief Digital Transformation Advisor for the Yuchengco Group of Companies. Concurrently, he is also the founding chairman of Fintech Alliance.ph.

Mr. Villanueva is the Philippines’ leading and award- winning thought leader on digital transformation and inclusive digital finance. Recently, he was named at the Innovation in Digital Banking Awards 2021 as the Chief Innovation Officer of the Year by the "The Banker," the prestigious, Financial Times-owned international monthly publication on financial affairs. 

He has over 20 years of experience in banking, telecommunications, payments, development finance, advisory, and financial technology. He is merited with over 60 global and regional awards, including being named one of the Top 100 FinTech Leaders in Asia and "Mr. Fintech of the Philippines" by BizNewsAsia.