From a financial institution, UnionBank of the Philippines (UBP) has completed its transition to become a full-pledged tech firm with the launch of its wholly-owned fintech subsidiary, UBX as part of the third phase of its dual transformation initiative.
Afterall, the Aboitiz-led lender has prided itself to be “both a bank and a technology firm.”
“UBX is the tip of the spear of what we call embedded banking,” stated Henry Aguda UBX, chairman of the board. He added that UBX is Transformation B of the bank’s dual transformation to its counterpart Transformation A which is to digitize the bank. “UBX is founded to create new spaces in blockchain, robotics, artificial, data sciences and IoT (internet of things).
He explained the UBP’s “dual personality” is now complete, with Union Bank as the bank and UBX the technology company. “It is tough for us to claim to be a tech company because we (UBP) is still a financial institution and it is not in our mandate to sell system integration and fintech solutions.”
However, UBX was allowed by the Bangko Sentral ng Pilipinas (BSP) to be established as a Singapore-based entity which sells its services willing customers. The new unit can also provide talents for clients who require tech developments or projects, with the creation of a Blockchain Institute which trains blockchain developers.
“We have created these capabilities (AI, robotics, data sciences, Blockchain Institute) so we can go to the market and build a variety of platforms to integrate the bank’s financial services to other banks and fintech,” added John Januszczak, CEO of UBX.
These capabilities could be made available to other banks and entities that are looking to develop their own digital transformation, he said. “If they are looking for blockchain capabilities or develop a platform on the blockchain, we have that so we can make that available as a tech company.”
To be sure, UBX is an entity that operates separately from UnionBank and is designed to be like a fintech company. “We want to co-create businesses and financial services that technology will unlock,” Januszczak said.
He went on to say that one of the many advantages of a fintech company is relaxed regulation on the segment compared to banks. This allows more room for thinking “outside-the-box” and implementing new services that those in traditional banking and finance may consider too “out-in-the-left field.”
Among the key features of UBX is it could usher the age of embedded banking in the Philippines, “where banking services are woven into the very fabric of everyday life,” Januszczak noted.
The unit, he said would focus on embedded banking; ecosystems and platform; and collaborating with experts and building the best experiences, especially for the unbanked and underbanked.
Embedded banking refers to banking that is made through a platform other than a bank – such as mobile apps and the IoT – which are expected to replace traditional banking channels in the next few years. Because it is effortless and straightforward for consumers, this is also likely to dramatically reduce the number of the country’s unbanked in a short period.
The new principle also means UBP has to rethink its old strategy of creating 50 million relationships and customers but to focus on making banking pervasive and embedded in everyday lives. To achieve that “UBX is moving beyond banking space by partnering with like-minded fintech,” Aguda said.
UBP president and CEO assured the fintech industry that UnionBank did not create UBX to compete with them but to establish a healthy ecosystem of collaboration and co-creation based on strategy and healthy opportunity.
“Initially, the first word of fintech were out there to conquer the world. Back then, it was very clear to them that they were going to each the lunch of these banks,” he said. “But that mindset had changed when they realized it was not that easy to displace bank.” While they have the advantage of agility and moving faster, banks have vast resources and well-entranced systems in place.
Fortunately, UBP was also quick to change its mind. From the initial reaction to prepare for war against the fintech, Bautista said he and management team of the bank decided they want to go along the advances in technology, preferring to take the alternative approach. “So instead of fighting fintech, why not collaborate with them because they have been in a lot of things on the table,” he added.
Thus, UnionBank embarked on three-year dual transformation initiatives that implemented on three stages. The result is UBP being recognized as the Best Digital Bank in the country, as well as receiving various international awards.
“In UnionBank, we have a promise that ‘UBP our bank, our future.” Now we can add, ‘UBX no longer a bank, already the future,’” Aguda concluded.