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SUNDAY, JULY 30, 2017
Business
Ray S. Eñano, Editor / Roderick dela Cruz, Issue Editor business@manilastandard.net
EXPERTS DISCUSS SONA OF DUTERTE
MINDANAO BANK GOES INTO THE CLOUD
WO former air force generals are bringing a Mindanao-based rural bank into the cloud, paving the way for the first bank in the Philippines that fully runs on a paperless, Internetbased core-banking platform. Cantilan Bank Inc., one of the largest rural banks in southern Philippines with 42 branches and extension offices, is switching to Instafin, the corebanking software of Croatia-based financial technology company Oradian, with the help of a $150,000 grant from the Asian Development Bank. “With this technology, you just need an Internet connection. You don’t have to maintain your data center. Everything will be in the cloud. All you have to do when you open a branch is bring a laptop, as long as you have a facility ready,” Cantilan Bank Inc. president Charles Hotchkiss, a retired brigadier general and commander of the 600th Air Base Wing of the Philippine Air Force, says in an interview in Makati City. All financial records and transactions of Cantilan Bank will be in the cloud, or the Internet, stored in the European servers of Oradian. Every transaction will be transparent and an instant report can be generated anytime and anywhere through Instafin, says Julian Oerhlein, the chief operating officer of Oradian. Charles’ elder brother, retired Lt. Gen. William Hotchkiss, a former commanding general of the Philippine Air Force and ex-director general of the Civil Aviation Authority of the Philippines, is the chairman of Cantilan Bank, while William’s daughter, Harvard-educated Tanya Hotchkiss is the bank’s executive vice president. Cantilan Bank, which started in 1980 as one brick-and-mortar rural bank in the second-class town of Cantilan, Surigao del Sur where the Hotchkiss brothers were born, is now one of the largest in Mindanao. It now has 42 branches and offices with 24 automated teller machines located across Caraga Region, Misamis Oriental, Compostela Valley, Davao provinces, Davao City and Southern Leyte. It had total assets of P2.4 billion as of December 2016. It was the first rural bank in Surigao to offer an ATM service and provided mobile phone banking through GCash as early as 2006. “The bank started in 1980 and our father was an incorporator. My brother [William], Tanya’s dad, retired from the Air Force in 1989. He went back to Cantilan and he was offered to join the bank as chairman and president. At that time, our bank had only three branches. My brother expanded the bank. When I retired [from the Air Force] in 2005, I also joined the bank. We continued with expansion. Now, we have 25 branches and 18 extension offices,” Charles Hotchkiss says. “We have around 400 employees. We have branches that have seven to eight people, while there are branches with 20 people. An extension office has three or four,” he says. He says at present, the rural bank spends nearly half a million pesos monthly for connectivity of the branches and extension offices, an amount that he hopes will be substantially reduced with the switch to the cloud. The Asian Development Bank provided a $150,000 grant to launch the cloud-based core banking technology in the Philippines, with Catilan Bank as the pilot institution. Cantilan Bank will use Oradian’s subscription-based banking platform to demonstrate how digital services can unlock financial opportunities for the unbanked and underserved segments of the population. “Right now we are reviewing our strategic plan, because of this technology. We are going to expand definitely in Leyte because the banks there are small,” says Hotchkiss. “We want to serve the unserved.” The Bangko Sentral ng Pilipinas’ 2014 Consumer Finance Survey shows that 86 percent of Filipino households were unbanked in that year. About 582 of the 1,634 cities and municipalities nationwide had no banks. Charles Hotchkiss says with the cloud technology, opening a branch will be faster and less costly. “Where we are now, we have to deepen it. We want to reach more people,” says Hotchkiss. Oerhlein, a German national who co-founded Oradian in 2012, says Instafin—the flagship core-banking platform product—is an all-in-one software which enables microfinance institutions, cooperatives and rural banks to manage their day-to-day operations more effectively and serve their clients more efficiently. Oerhlein says Instafin will replace Cantilan Bank’s existing system. “Our system has everything integrated—loans, savings, accounting and business intelligence. On a click of a button, if someone enters a transaction in some branch, and you click the system to see a report, instantly you see what is going on. It really increases transparency and it allows them to be fully in control of what is happening,” he says. “The integration depends on the customers requirements. We can integrate ATM cards, we can integrate bank transfers, we can integrate remittance, we can integrate directly with credit bureau. It really goes just a week or two, so it is really fast,” says Oerhlein. Tanya Hotckiss says the Bangko Sentral ng Pilipinas supports the project and waits for the result of Cantilan Bank’s migration to the cloud. “They want to see how this affects operation efficiency, so that they can see the impact when it comes to scale. It is very helpful for us to be partners of organizations like ADB as they provide financial support. More importantly, they provide the monitoring and evaluation aspect,” she says. “We are required by regulation to have a pilot that is running in parallel with our current system. So you can imagine the financial cost. This is why we looked for financial help [from ADB]. We knew that the impact of this project does not affect just Cantilan. It may affect the entire industry. So
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Cantilan Bank Inc. president Charles Hotchkiss (left) and executive vice president Tanya Hotchkiss
Oradian business development manager Kcaper Marcinowski (left) and chief operating officer Julian Oerhlein
TOP policy experts and members of civil society discussed President Rodrigo Duterte’s state of the nation address affecting the country’s economic development in a forum organized by an independent international think tank in Makati City. “The promise of deep-seated change could not come at a more opportune time. It is obvious to all of us that the government needs to address urgent economic issues and promote a strong flow of investment,” said Dindo Manhit, president of Stratbase ADR Institute. “It’s clear that the president needs to work with both the legislature and the judiciary to ensure that his projects see the light of day within his term,” he said. Dr. Alvin Ang, director of the Ateneo Center for Economic Research and Development, discussed how President Duterte recognized the massive coordination failure he is facing. “Despite political will and resources, he is facing the same problems that hampered the infrastructure projects of the Aquino Administration,” Ang said. He cited as an example the Skyway 3 project that remained only 24-percent completed. “ The frustration comes out in that regard. There is need for coordination among equal branches of government,” said Ang. “We need jobs that are quality jobs and not short-term. We can call for patriotic business. Many of the businesses run in this country are not able to produce enough jobs for the rest of the population,” Ang said. Ang linked government capacities to the challenge of federalism. “The frustration of the president mirrors the ordinar y people’s frustration on gover nmental capacities. You cannot solve traffic or do this or do that because there are silos that rules them. Until institutional alignments are understood in terms of capacities, I guess we’ll go back to the same issues regardless of the new structures in place,” said Ang. The West Philippine Sea and Duterte’s pivot to China was cited as critical and could not be put on the side for a long time. “People already know that it is ours in the context of economic zones and the naming of the area. With China as the biggest trading partner of the Philippines now and courting it for foreign direct investments, it is a high wire walk, how to attract investments of China and to give up the West Philippine Sea control or at least postpone it,” Ang said.
we wanted to ensure that a third party [ADB] is watching this. Basically, this is the first rural bank for them here in the Philippines,” says Tanya. Tanya hopes that the full transition to the cloud will be accomplished in three to four months. Oradian, a software-as-a-service provider founded in May 2012, has three servers in Europe. Established by experts in microfinance technology, it now has more than 40 clients in Nigeria, Ghana, Liberia, Malawi and the Turn to C2
TECH EXPERT PREDICTS THE FUTURE OF PH BANKING AN EXECUTIVE of global software company Amdocs believes that agent banking is the future of banking in the Philippines. Amdocs vice president for mobile financial services Justin Ho defines agent banking as a network of banking agents s e r v i n g a s p hy s i c a l b a n k branches. “With 60 percent of Philippines’ adult population still unbanked, especially in very remote unreachable rural areas, where banking services penetration is low due to lack
of physical infrastructure, agent banking can help fill this gap,” Ho says in an email interview. Ho, who helped establish and served as co-chief executive of Utiba Pte Ltd., a pioneer in the field of mobile commerce, before he joined Amdocs, is a strong advocate of financial inclusion and branchless banking. He holds a Bachelor’s degree in Mechanical Engineering from Melbourne University. “Agent bank ing can aid traditional banking by adding another channel to it to make
banking services accessible to unbanked people at a cost point that matches the banks potential revenue and profit targets for these segments,” he says. Ho says setting up a network of banking agents can serve as a physical backbone and help banks and mobile financial services providers extend their reach in a cost effective and agile manner. “ With increasing mobile connectivity and smartphone usage, and innovation in financial technologies, agent banking can be used to deliver full-fledged
banking services such as saving accounts loans, insurance products, personal finance management and others to this extended population,” he says. “The ubiquity and agnostic nature of the mobile channel – is a perfect way to spread the benefit of agent banking to more Filipinos – anyone with a smartphone or even a simpler, USSD based phone can utilize the technology and also benefit from increased convenience and often lower fees. The lack of overhead [since a physical branch isn’t
required] and lower variable costs involved also means that banks often waive fees normally associated with transactions for an agent’s customers,” he says. Ho says telcos have recently led the recent development of mobile money products with great success. “This is a great opportunity for banks to act on the prospect to increase the proportion of digital or mobile customers in the region,” he says. In agent banking, agents can assist with new customer onboarding for the bank, thereby
Amdocs vice president for mobile financial services Justin Ho
extending and accelerating the bank’s reach, he says. As agent banking technology advances, banks will be able to offer more services such as loans, mortgages and savings accounts – without having to invest in ‘bricks and mortar’ bank branch infrastructure, Ho says. Roderick T. dela Cruz