The digital banking arm of Aboitiz-led Union Bank of the Philippines is moving toward high-frequency lending with shorter payment periods to boost its loan portfolio and include more Filipinos in the banking ecosystem.

On the sidelines of the Singapore Fintech Festival, UnionDigital Bank president and CEO Henry Aguda said the financial institution aims to double its current P12 billion loan portfolio as it introduces products meant to tap Filipinos who do not have access to formal credit.

As such, Aguda said UnionDigital targets to make lending configurable where borrowers can pay in a shorter period of time. As of now, UnionDigital offers loans that can be paid in months.

'Even if the economy is very good, I think there is a place for high-frequency lending. Sometimes, a borrower wants to pay immediately, but the tenor is longer so he tends to spend it on other things,' Aguda said.

'But now, you can pay already and then you can borrow again. And this program will be pushed to be much more community-based for a more customized lending,' he said.

UnionDigital chief commercial and revenue officer Mike Singh, for his part, said the product would target the middle to lower half income pyramid, especially as the mass market lives on a day-to-day basis.

Singh noted that it would be designed for Filipinos who need to meet their needs for a short period of time, such as to pay the bills, tuition, medical emergencies, and even those whose expenses are unfortunately exceeding their income.

'Right now, it's monthly (payment). We will move it to two weeks then we'll do it weekly, then the aspiration is making it on a daily basis,' Singh said.

Aguda added that there is a need to imitate the actual scenario on the ground where Filipinos actually pay their dues on a daily or weekly basis.

'We have to mimic how it is because if not, they will not adapt to the structured normal banking lending operations,' Aguda said.

As of now, about 50 million Filipinos are considered unbanked and Singh explained that this is because banks are risk-averse.

While a lot of banks talk about having an account as a metric for financial inclusion, Singh argued that credit is the primary need, especially now that Filipinos are digitally savvy, making it easier for them to access loans that can be available.

About 60 percent of UnionDigital's borrowers are earning less than P20,000 per month.

With the new product expected to be launched in the second quarter of 2024, Singh said this could double UnionDigital's loan portfolio.

'The first version of that will likely be a 30-day minimum, but no prepayment penalty. The final version, you can pick if you want a three-day or four-day loan,' Singh said.

With new products in the pipeline, UnionDigital will also be needing fresh capital from its parent bank.

Just recently, Union Bank infused P300 million to its digital unit to sustain its expansion.

'At this time, it is still sufficient for our growth, but we're in the process now of writing up capital requirements for the next 24 months,' Singh said.

UnionDigital is confident that loan demand will remain strong next year. Data showed that seven out of 10 Filipinos borrow, but only one of them gets it from a formal institution as the rest secures money from loan sharks, family and friends, and pawnshops, among others.

'The demand is great. Everybody needs credit to live, to survive. This formalizes the lending market,' Singh said.

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