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AI shows way for smart banks

Development in digital banking services leap-frogging, more out of necessity, as clients demand bigger remote access due to the lingering threats of the coronavirus disease.



BAUTISTA | illustration by glenzkie tolo

Post-pandemic, life will never be the same as before which also applies to financial services as banks race to transform their products to digital in their effort to adapt to the requirements of the health crisis.

At the moment, the Bangko Sentral ng Pilipinas (BSP) has capped the licenses for digital banks at six which are Union Digital Bank (UnionDigital), Overseas Filipino Bank, a subsidiary of state-owned Land Bank of the Philippines; Tonik Digital Bank Inc. (Philippines); UNObank; GOtyme, a joint venture between the Gokongwei Group and Singapore financial technology (fintech) firm Tyme and Maya Bank, the fintech arm of Voyager Innovations Inc.

Union Bank of the Philippines (UnionBank), the parent of UnionDigital, sees the future of financial services as largely happening in the virtual world which means that the services offered should be aligned with electronic commerce.

UnionBank president and CEO Edwin Bautista sees the development in digital banking services leap-frogging, more out of necessity, as clients demand bigger remote access due to the lingering threats of the coronavirus disease.

“Regulators are trying to see how best to oversee the existing (digital) banks. Will they really open it up in a big way so the level of safe guards and all of that stuff is being reviewed. But for the next years, the memoratorium will be in effect, but we don’t really know,” Bautista indicated during the weekly Staight Talk online forum of Daily Tribune.

AI key to future shift

Artificial intelligence (AI) will play a pivotal role in the future of banks worldwide, he said.

Emerging technologies like 5G will speed up transactions and allow many new things to be developed.

“I’m sure you have heard of the smart cities where nearly all parts of a home such as appliance are connected to the Internet and are interactive,” Bautista noted.

Internet of things, for example, provides for a faster level of commerce. “When you open a refrigerator and you’re out of orange juice, automatically the refrigerator will make an order to replenish your stock. That is already happening in many countries,” the UnionBank chief related.

“Imagine how transactions multiply if purchases happen in an instant, the economy benefits from the fast turn-around. That will become a reality when network connectivity improves.”

Another catalyst to the digital transformation was the recent Executive Order (EO) that President Rodrigo Duterte signed directing government institutions to use digital payments for disbursements.

EO 170, signed by Duterte on 12 May, cited the pandemic as highlighting the benefits of digital payment services.

Technology leaps

When government gives out assistance, it used to be handed out in checks or in cash which have drawbacks as the use of checks usually require a bank account, while cash placed in envelopes invites irregularity.

“The issuance of the EO will go a long way. What is envisioned is that the simplest transactions such as paying tricycle fares can be done through swiping a smart phone,” Bautista stated.

According to Bautista, the government benefits from digital commerce. “What that will do is it will allow the government to closely monitor transactions of a community. Tax collections become quick. That will result to what is termed as a smart city initiative.”

At the moment, with the quantum speed of technology development, Bautista said the direction of the market remains a mystery.

“Whether it will be the card, mobile phone, or QR (quick response) code or even wearables, we don’t really know where the market is going but that idea that you can quickly make a payment will happen very soon,” the UnionBank official indicated.

UnionBank is supporting the use of QR codes. “Regarding the QR initiative, our credit cards already have chips that pwede mong i-tap sa mga ganun. So we are trying to cope at all fronts until the technology matures,” he added.

Bautista said he remains unsure which technology will take off. “That will depend on customer behavior and which one will eventually prefer,” he noted.

UnionBank will be using AI to establish the identity of clients, whether an ID card is fake or not.

“There are ways of doing it, to match the face with the picture of the ID and then with the national ID system that uses biometrics. So this idea of people pretending to be someone else will not happen with the new technologies in use,” he noted.