UNIONBANK of the Philippines, Inc. piloted its cross-border remittance service for local rural banks through blockchain, as it aims to push financial inclusion in rural areas.
In a statement yesterday, the Aboitiz-led bank said it successfully transferred tokenized fiat from OCBC Bank in Singapore to an account in Cantilan Bank, a Surigao Del Sur-based rural lender via UnionBank’s blockchain platform i2i.
The fund was remitted using the Adhara liquidity management and international payments platform.
“Using blockchain technology for bank-to-bank cross-border remittance promotes financial inclusion, particularly in underserved areas, as customers will see significant cost savings and near real-time transfers at the touch of a button,” UnionBank said in the statement.
i2i is a blockchain-based platform that connects rural banks to each other and to UnionBank, providing small lenders access to value added services which can be coursed through the system. Launched in 2018, i2i is now handled by UBX, UnionBank’s financial technology arm.
Blockchain is a distributed data ledger which involves a large network of entities where data is stored in “blocks.” The storage units are continuously updated and being secured using cryptography, making data management and data-driven processes decentralized, tamper-proof and more transparent.
“With the pilot’s use of i2i, rural banks can now receive direct-to-account remittances, and this is only the beginning,” UnionBank Senior Vice President and Head of the Fintech Business Group Ramon Vicente V. De Vera II said. “This empowers rural banks that were once financially excluded, with access to universal banking services.”
Currently, rural banks have limited access to financial networks and clearing systems, with remittances from abroad taking days before being credited to onshore accounts. As an alternative, Filipinos rely on non-bank remittance counters that require remitting the funds physically and are subject to high fees.
“Blockchain and emerging technologies make this possible at scale by collaborating with institutions on the spot and promoting inclusion,” said UnionBank Chairman Justo A. Ortiz.
The Bangko Sentral ng Pilipinas (BSP) is eyeing to raise the share of e-payments to 20% of all transactions in the Philippines by 2020, coming from a measly 1% share back in 2013.
BSP Deputy Director Melchor T. Plabasan said the monetary authority anticipates “greater adoption of blockchain and distributed ledger technologies” given their potential of reducing unnecessary points of friction in payments and remittance. — K.A.N. Vidal