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June 19, 2024

AI, blockchain making banks more inclusive in the Philippines

Union Bank of the Philippines headed by bankero Edwin Bautista stressed the importance of artificial intelligence (AI) and blockchain in banks promote financial resilience in the country.

UnionBank chief data and AI officer David Hardoon AI helps excluded communities access banking services, helping Filipinos achieve financial resilience.

UnionBank’s business loan project for micro, small, and medium enterprises (MSMEs) was created with the aim of extending credit access to the bank’s mass market clients—including rural communities—through the enhanced, alternative AI-powered credit scoring and risk models.

UnionBank business loan is being offered in SeekCap, an online lending marketplace managed by the bank’s fintech arm UBX.

“Many rural residents struggle to get a loan to start a business or go to college as they need credit scores. Farmers or vendors mainly use cash instead of credit cards,” Hardoon said.

As it is harder for banks to assess their credit worthiness, they might not be eligible for a loan.

The enhanced, alternative AI-powered credit scoring and risk models evaluate credit scores based on alternative data such as macro and socio-economic data, geographical attributes such as points of interests and land elevation, and internet footprint.

With the help of data analytics and machine learning, data-driven recommendations are generated on whether to extend the loan to the customer in a few seconds. This makes it faster and more flexible for rural residents to get loans.

Hardoon said blockchain technology in banking could rapidly connect institutions that were previously not connected. This allows transactions to occur immediately without going through a third party.

A study conducted by the World Bank showed rural banks are disconnected from major banks and each other because they do not have the tools to provide electronic banking services.

This makes it hard for rural residents to receive or transfer funds quickly. About 53 per cent of Filipinos live in rural areas.