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Union Bank on Helping Rural Banks Through the Blockchain

Photo for the Article - Union Bank on Helping Rural Banks Through the Blockchain

The blockchain is not just about cryptocurrency. It’s not just about bitcoin. But while it has use cases in other industries, it is with money where blockchain is currently being utilized a lot. With bitcoin, we learned that the blockchain can move money faster. We learned that transaction fees can be lower. This and other advantages make the blockchain an ideal solution for remittances.

Union Bank has this idea to utilize this new technology to help rural banks.

The Case for Rural Banks

In his presentation on the DTS 2018 Summit Arvie De Vera, Head of Fintech over at Union Bank, noted the decreasing number of rural banks in the Philippines. And this is not how it should be. Rural banks are in front of the people whose access to traditional banks, and therefore, credit, are limited.


But the number of rural banks have decreased in the country. There were 1,400 rural banks in 1988. In 2018, only 400 of them are left. So what’s making it hard for rural banks to succeed? Mr. De Vera noted the following challenges:

  • Most rural banks are not members of the Philippine Clearing House (PCH) and Bancnet.
    • They can’t deal with checks and ATMs.
  • They are not members of SWIFT (Society for Worldwide Interbank Financial Telecommunication)
    • Receiving and securing foreign funds must be done via a large partner bank.
  • Lack IT systems
    • The process is often very manual and paper-based.
  • In addition, requirements for Bancnet, PCH, and SWIFT are challenging for the rural bank to meet.

The Big Idea

Union Bank is studying the blockchain for some time now, and what better way to use the technology by using it to onboard rural banks into the banking network. To do this:

  • Onboard rural banks to a blockchain-based platform with Union Bank acting as the settlement bank.
  • The blockchain-based platform will allow real-time transfers between banks. This will, of course, cut cost and time.
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If this is successful, the rural banks and their customers can have access to universal banking products, thereby adding productivity and efficiency in the rural bank. If the rural banks become successful, it will mean more service to the unbanked, more access to credit, which should ultimately help the countryside to be more productive. Around 6 rural banks are in partnership with Union Bank for this blockchain effort. The bank said it is open to more tie-ups in the future.