Symbiosis in the

Fin x TechWorld

Justo A. OrtizChairman

Arvie V. de VeraFintech Business Group Head

15 November 2018 | Inclusive Fintech Summit 2018 | Singapore Fintech Festival

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TRANS. B

(Embedded Banking

Experience)

“Technology Company

with Banking Utilities”

W H A T W E D O

HO

W W

E D

O IT

TRANS. A“Best Digital

Bank”

CORE“Great Retail

Bank”

(FOCUS 2020)

Unbanked

(Adjacent Market;

Banking the Unbanked)

TRANS. C+“Best Mass

Market Bank”

(Credit for more;

Eliminate cash)

DUAL TRANSFORMATION STRATEGYStrengthening Today; Creating Tomorrow

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INVEST

ENABLE

BANK

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Symbiotic ConvergenceTech Companies

Traditional Banks Fintechs

Capital to scale

Google

Amazon

Facebook

Apple

Alibaba

PayPal

MasterCard

Visa

Intuit

Oanda

Yodiee

Lending Club

Marketing power

Personal data assets

Loyal customer base

Brand

Scale / Balance Sheet

Sophisticated Infrastructure

Trust advantage

Large corporate & consumer base

Personal data assets

Banking license

Marketing power

Access to capital/liquidity

Branch network

Risk, security, fraud protection

Regulatory domain knowledge

Cutting-edge technology

Superior customer experience

Lean IT

Low-cost producer

Personal data assets

Legend: Evenly Matched Potential Areas of Collaboration/Convergence

Digital customers are more engaged, generating significantly higher revenues

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Outstanding balances are 4x higher

Spend amount is 6x higher (for carded customers)

Translating to a revenue of 2,000 (12x higher)

vs. 170 for non-digital

As digital score increases, engagement deepens

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ISLAND TO ISLAND

INSTITUTION TO INSTITUTION

INDIVIDUAL TO INDIVIDUAL

EYE TO EYE

PROJECT

The Intersection of Blockchain & Banking

• UnionBank is pioneering blockchain technology along with the BSP

• Project i2i is a blockchain platform that connects rural banks and allows them

as untrusting actors to interact with their communities

• The platform also enables rural banks to offer a comprehensive suite of

services and products to their customers, driving growth, sustainability as well

inclusive prosperity

The Rural Banking Challenge in the Philippines

• Rural banks are embedded in unbanked communities

• They lack resources and inclusion as compared to larger banking

institutions

• Rural-based Filipinos have limited access, lack of relevant product

offerings, and poor customer experience

Symbiosis with Technology Companies

X

TECHNOLOGYBANKING

7

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Symbiosis with Fintechs

REACH 1,000,000 SMEs

CREATE Initial UBP relationships. Cross-sell.

LEARN Customer experience, proxy data

INVEST Equity, Platform as a Service, Credit

WHY?

Banking structure

Customer base

Balance sheet

Use of alternative data/models

Superior customer experience

X

LENDING FINTECHSBANKING

“ ￮ ECOSYSTEM BUILDING & MOVEMENT CREATION

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10

MOVEMENTS

PARTNER

ASSOCIATIONS

TECHNOLOGY/

PLATFORMS

PEOPLE/ EDUCATION

DEMAND SIDE STIMULATORS

SUPPLY SIDE DRIVERS

CUSTOMERS

Corporates SMEs Individuals

Rural Banks Cooperatives

REGULATORS

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Digital transformation for the rest of us.

An exchange and platform for:

Those who want to tech up

Those who want to offer tech to

others

Those who want to learn

WHAT IS TECH UP?

OUR HOPE: To create tech solutions that create

the greatest inclusion

FOUNDING MEMBERS

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BLOCKCHAINASSOCIATIONOF THE

PHILIPPINES

MISSION & VISION

To engage the community at large in our thrust, which is

blockchain for the greater public good.

To harness the best practices of blockchain in the PH and

export it to the rest of the world.

To encourage experimentation, collaboration and co-creation

amongst various stakeholders; giving a safe space to pioneer

this technology in various industries.

Our center of excellence will train and produce some of the

top blockchain talent in the world.

In collaboration with the government and other blockchain

associations, build a blockchain-enabled Philippines.

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BLOCKCHAIN ASSOCIATION OF THE PHILIPPINES LAUNCH: MAY 29, 2018 IN BLOCKCHAIN APPLICATIONS & ECONOMICS FORUM

How do we nurture symbiotic convergence?

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We need to TRANSFORM

Strategy

Process

People

Culture

Space

Ubuntu

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Strategy

Community-centered banking ingrained in our DNA

50M

1MIndividuals

SME Businesses

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Strategy

To ‘Make Da Diff’ in the lives of others, in the communities we

serve by connecting and enabling communities through

Smart Banking in the spirit of Ubuntu

Establishing a Moonshot

PURPOSE

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StrategyHow to ACQUIRE 50M customers? 1. Build Counters / Agency Banking

• Access to Petnet and

DragonPay counters

• Petnet has total of 3,190

counters (407 company-owned; 2,873

business partners)

• DragonPay has 14 bank

partners & 14 non-bank

partners, with a total of 15,000

counters; ~900 merchant

partners

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StrategyHow to ACQUIRE 50M customers? 2. Build Ecosystems

Importer/Broker

ICTSI Community Debit Card

ICTSI Branch ATM/BranchePay card

ICTSI Employees• Needs to pay customs

tax to ICTSI for the

release of goods• Collections are made faster and more efficient

• Goods are released in a timelier manner

• UnionBank credits funds to ICTSI employees during payroll periods

• ICTSI employees can withdraw their

salaries via UnionBank ePaycard

from UnionBank ATMS/branches

• ICTSI maintains payroll account with UnionBankCOLLECTION

DISBURSEMENT

Shipping

Global Logistics PlatformCustomers/Buyers Suppliers/Sellers

Order/Service

Request

Order/Service

Request

Order/Service Delivery

Payment SettlementAPI

Bills Pay via OTC or

SWIFT (int’l)Bills Pay via online

channels

Payment partners

(local & int’l)Send to a UnionBank

accountSend via partners/

SWIFT (int’l)

Send via PESONet or

InstaPay

Logistics Platform

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StrategyHow to ACQUIRE 50M customers? 3. Invest in UBx UBx

(Innovation Company)

FinTechs

VC / Exchange

Tech Services

IT-BPO

Design

Source

Safe

Analysis Review

Automation

Deploy

Test CaseBuyers / Customers / End Users

Platforms

UNIONBANK

PLATFORM

Sellers / Producers /

Manufacturers / Service Providers

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StrategyHow to ENGAGE 50M customers? Co-Create with Customers

EON’s Board

of Co-Creators

who provide

feedback to

develop and

improve EON’s

app & products

UREKA, a

collective

action to bring

together SME

owners and

businessmen

into the online

world

UnionBank

Hackathons,

which has been

an incubator of

innovative ideas

as teams of app

developers,

professionals, &

students, get to

pitch their own

solutions to

societal

problems

Customer

information and

transaction data

are translated

into predictive

models which

help UnionBank

in crafting

customer-

targeted

campaigns &

promos.

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Culture

Values-based, purpose-led

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The

culture

was not

yet ripe

Culture

Tomato

Soup

Story

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Culture

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‘Exemption from the Rule’Antonio Magnayo III (Assistant Collector, SME Business Line)

“UBP gives a three-month leeway for clients before their accounts are processed for foreclosure.

After a series of delayed payments, Mr. and Mrs. Basalo visited our office to inform us that they can’t afford to

pay for amortization within the time given to them because their savings were all being used for Mr. Basalo's

medication.

A few days after, Mrs. Basala dropped by the office to tell me that Mr. Basalo already died. I felt a deep pang

within my soul, but I had to keep my cool and tell Mrs. Basalo the consequence of past due payments.

I felt her stress and sincerity, so I sought approval to hold their account. It moved me to ask for a two-month

extension for my client. Happily, it was approved!”

Celebrating DNA Stories

‘A Bank for Others’ Mary Anne D. Ricaza

(Branch Manager, Medical City)

“ Compliance should never be compromised but servicing clients with a heart should never be

forgotten.

On Saturdays, banking hours at the Medical City branch is from 9am to 1pm. On a Saturday, a

client from the hospital’s clinic came to the branch wanting to claim her check. Unfortunately,

there was no scheduled check release on a Saturday.

Thinking on my feet and wanting to provide the service to the client, I asked for the client’s

identification documents and other verification requirements to release the check. The client

was very thankful after her transaction was processed.

Culture

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Go-Beyond Communities REaCH: Relevant, Expert, Challenging Conventions Projects

Employees are encouraged to form their own groups and drive their own advocacies

through the Bank’s employee-driven corporate social responsibility initiative

Encourages cross-functional middle management teams to come up with innovative

products or processes improvements and propose them to top executives to seek

mentorship

440communities

11,141volunteers

1,487,495beneficiaries

51,334hours spent

“Team U-Won”

U-Bot

Streamlined chatbot for HR and IT

related FAQs, employee-related

concerns to provide solutions and

improve process efficiency.

Project E-Sig

Electronic signatures for approval, aligned

to the internal policies and processes of the

Bank, to promote efficiency and

productivity.

“Bee Squad”

White-labelled food service app for food

order, pick-up, and delivery of Kinuron.

The app will offer convenience and

productivity for UnionBankers and

increased profit for the concessionaire.

Digicaf

“Team Hangry”

Culture

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Culture

Agile-First

SQUAD FORMATION AND PROFESSIONAL SCRUM MASTER TRAINING & CERTIFICATION

Squad Quicksilver

Squad Branch Transformation

Squad GC on Blockchain

Squad Global Linker

Batch 1

Batch 2

Batch 3

Batch 4

AGILE

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CultureAcquire New Knowledge & New Ways of Thinking

We need to re-think our own cognitive biasesAt the end of the day, we need to unlearn, re-learn, and learn anew

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Space

Transforming spaces to enhance customer experiences

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SpaceThe ARK – first-fully digital branch in PH

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SpaceFrom physical to virtual spaces…

EON Banking“First Selfie Banking in Asia”

Rafa“First Banking

Chatbot in PH”

UnionBank Online Mobile & Web

Upgraded version of UMobile App

GloballinkerOnline Platform for SMEs and

Suppliers

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Space... such as platforms

Global Logistics PlatformCustomers/Buyers Suppliers/Sellers

Order/Service

Request

Order/Service

Request

Order/Service Delivery

Payment SettlementAPI

Bills Pay via OTC or

SWIFT (int’l)Bills Pay via online

channels

Payment partners (local

& int’l)Send to a UnionBank

accountSend via partners/ SWIFT

(int’l)

Send via PESONet or

InstaPay

Logistics Platform

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Process

Becoming Digital to the Core to reach more, faster

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ProcessGoverned by a BIAN-based Enterprise Architecture

API (Application Program Interface) Platform

BPA (Business Process Automation) Platform

Security and Resilience

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API PlatformStart building apps with UnionBank’s APIs!

https://developer.unionbankph.com/

708

API end points

137No. of

exposed APIs

powered by

*as of October 2018

Process

18.2MTotal API calls

412KAvg daily call

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BPA & RPA

Piloted on Processing of End-of-Day Reports

for 250 CMS Billers

People 18 0

Time per Task 120 sec 18 sec

Total Processing Time 8.33 hrs 1.25 hrs

2016

2018

100%

0%

60%

Operations & Execution

Sales & ServiceReference Data

Product Mgmt.

Market Data

External Agency

Party Data Mgmt.

Customer Profile

Risk & Compliance

IT Risk

Emerging Risk

Operational Risk

Market & Liquidity Risk.

Credit Risk

Modelling & Risk

Analytics

Marketing

Brand Mgmt.

Advertising

Campaign Design

Promotional Events

Customer Surveys

Comparison Purchase

Loans & Deposits (Retail)

Salary Loans

Auto Loans

Mortgage

Term Deposits

Current Account

Savings Account

Sales

Campaign Execution

Lead Opportunity Management

Customer Offer

Sales Planning

Commissions Agreement

Product Sales Support

Accounts Management

Position Keeping

Fraud Detection

A/cs Receivables

A/cs Reconciliation

Counterparty Risk

Product Combination

Product Marketing

Channels

Contact Center

Management

E-branch Admin & Operations

ATM Management

Branch Currency Distribution & Mgmt.

Commercial / Corp. Banking

Credit Facility

Limit & Exposure

Management

Working Capital Loan

Term Loan

LC/BG

Check Lock Box

Supply Chain Finance

Factoring

Product Inventory Management

Product Inventory

Distribution Mgmt.

Branch Location Management & Ops

Branch & ATM

Network Mgmt.

Adv Voice Services

Management & Ops

Loan Operations

Underwriting

Disbursement

Collateral Mgmt.

Collections Mgmt.

Cards

Card Processing

Rewards Management

Customer Mgmt.

Customer Agreement

Access Entitlement

Behavioral Insights

Reference Data Management

Customer Credit Rating

Customer Precedents

Cross Channel

Transaction

Authorization

Party Authentication

Contact Dialogue

Customer Workbench

Interactive Help

Servicing Activity Analysis

Servicing Event History

Payments

ACH Fulfillment

Central Cash

Handling

Cheque Processing

Correspondent Bank

Financial Gateway

Financial Message Analysis

Payment Execution

Auto Debit

Operational Services

Device Management

Customer Billing

Channel Activity

Analysis

Channel Activity History

Market Operations

Confirmation Matching

Settlement Management

Customer Event History

Customer Eligibility

ServicingCase Root Cause

Analysis

Customer Case Management

Servicing Issue

Payment Order

Notification Engine

Treasury Services

Remittances

Currency Exchange

Trading Services

Dealer Workbench

Trust & Investment Svcs.

Investment

Management

Trust Services

Business Support

Business Command & Ctrl.

Fixed Assets & Procurement

Human Resource Management

Finance

IT Management

Business Direction

Corporate

Relations

Document Mgmt.

& Archive

Business Analysis

201740%

20%

201980%

Mapped out 761 processes of the Bank and

reengineered them into 87 projects

Business Process Automation (BPA) Robotics Process Automation (RPA)

Process

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ProcessCloud Computing

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Artificial IntelligenceProcess

Natural Language Processing in Chatbot “Rafa”

Key Features:

• ATM/Branch Location

• FX Rates

• Product Inquiry

• Card Balance Inquiry

• Card Activation

Next Best Offer in RM Mobile Assistant Express (MAX) 3.0Real-time offers tailor-fitted to a client

Other Features:

• Calendar & Planner

• Navigation & Route Tracking for Client Calls

• Client 360-view (real-time data from core

banking system and historical client data)

Blockchain Projects

Blockchain Institute Ideation

Internal Blockchain Projects • Tokenized real estate investment trust

• General Circulars • Commercial bank-backed stable coin

• Loyalty rewards of card products • Token escrow service for token offerings

• Federated ID system of customers & employees • Participating in a virtual currency exchange

• Electronic Invoice Presentment & Payment (EIPP) • U-Share

Founding member of Visa B2B Connect on

Hyperledger

• Tokenizing ancestral domain land holdings to create

collateral value and finance agricultural land

developments

JP Morgan Interbank Information Network on

Quorum

Project i2i – financial services for rural banks

XLog – logistics and supply chain

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BlockchainProcess

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IoT, Data Science, Quantum ComputingProcess

Data

Science

Internet of

Things

Quantum

Computing

Data Lake

Input Layer

Behavior Score

Accuracy

93%

Hidden Layers Output Layer

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CapabilitiesCybersecurity & Resiliency

INTEGRATED OPERATIONS CENTER a collaborative facility that monitors the Bank’s

operations and cybersecurity measures on a 24/7

basis

TRIANGULATING THE NETWORK Co-located UnionBank’s Disaster Recovery Site to

a Tier 3 data center that meets international

standards 41

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People

Digital Transformation with ‘no one left behind’

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Digital Transformation with no one left behindPeople

Shareholders Regulators

Jeremy RifkinEconomic and Social Theorist; Advisor to presidents of the

European Commission and EU heads of state such as Angela

Merkel at 2017 Board Strategic Planning

Brett KingFuturist, CEO of Moven & Amazon Best-Selling Author of Bank

3.0 at the 2017 Board Strategic Planning

Thomas FreyGoogle’s Top Rated Futurist Speaker at the 2015 Board

Strategic Planning

Joe LubinCo-Founder of Ethereum and ConsenSys

at the 2018 Board Strategic Planning

Mike KayamoriCo-Founder & CEO of Quoine, which has one of the largest

cryptoexchanges in the world, at 2018 Board Strategic Planning

BSP Governor Nestor Espenilla Jr. and Chief Fintech

Officer of Monetary Authority of Singapore Sopnendu

Mohanty with UnionBank’s “ERB Miner 8” bitcoin

mining rig

BSP Workgroups

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Digital Transformation with no one left behindUBP Leaders UBP Employees

Brian Cu, Grab Country Head, on

building a disruptive business

Leonhard Weese, President of the Bitcoin

Association of Hong Kong, on Bitcoin

Skills Development for IT and Non-IT Teams (Coding 101)

Townhall/Learning Sessions

Training Plans & Career Development Tools

8 UnionBank University Academies

• Marketing

• Sales

• Leadership & Management

• Six Sigma & Lean Enterprise

• Digital and Innovation

• Self-Mastery

• Operations

• Risk and Compliance

Some Learning & Development Programs:• Design Thinking – 16 runs, 272 participants

• Basic Coding: HTML, CSS, and Java Script – 6 runs, 70

participants

• Secure Coding for Developers – 2 runs, 13 participants

• ITIL Foundation Certification – 2 runs, 37 participants

• ITIL Crash Course – 5 runs, 110 participants

• Introduction to Agile Project Management – 3 runs, 68

participants

• Project Management Fundamentals – 6 runs, 94 participants

• Lean Six Sigma Orange Belt – 4 runs, 108 participants

• Blockchain Training with Consensys with more than 30 certified

solidify developers. UBP is the first bank in the Philippines to

build a Blockchain Center of Excellence

People

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Digital Transformation with no one left behindUBP Employees

Best HR System ProjectAsian Banker Philippine Country Awards 2017

UnionBank Human Capital Management (HCM) System

• Sourcing

• Recruiting

• Onboarding

• Employee Profile

• Performance Management

• Goals Setting

• Learning & Development

• Talent Review

• Succession

People

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Ubuntu

Building symbiotic convergence

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Ubuntu

PARTNERSHIPS

EMPLOYEES CUSTOMERSCHANNELS

DOMAIN EXPERTSCOMPETITORS

Agile OrganizationCo-Creation

Agency BankingEcosystem / Platform Play

Symbiotic Convergence

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END

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