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UnionBank to Connect Rural Banks Using Blockchain Technology

A bank in the Philippines wants to bring the true potential of the blockchain technology to life; connecting rural banks and people to the clearing system.

UnionBank, the ninth largest bank by market capitalisation is seeking to connect rural banks to a blockchain based transaction system called Project i2i or island to island, individual to individual and institution to institution. The project is being undertaken in partnership with Visa.


According to a bank official, small lenders operating in rural areas do not have the capability to connect to the clearing system due to the manual processes they employ. Blockchain technology can bring more connectivity according to Ramon Vicente V. de Vera II.  who heads financial technology and partnerships at the bank.

“Other than that, it also has the power to make things more efficient and productive,” de Vera is quoted as saying.

Transfers are expected to be completed in real time or within 24 hours. Fees are also expected to go down significantly according to the bank’s CEO Edwin Bautista.

Processes to be streamlined

Certain processes such as rural interbank transfer, remittances, accounting records will be streamlined through the use of the technology de Vera said.

“One of the insights in the use cases we had was that an outgoing funds transfer — which normally took 26 steps — through the use of blockchain, the steps will be reduced to four,” de Vera noted.

Blockchain Finance

A pilot test is now set for June 15 and will involve five banks including Cantilan Bank, Progressive Rural Bank and CitySavings Bank. The plan has been approved by the central bank of the Philippines.

The move will allow UnionBank to offer some of its services to the rural lenders on the platform.

UnionBank Chairman Justo Ortiz says about 35 million Filipinos are unbanked. The technology will help hasten the process for their inclusion, he noted.

Ortiz is also the chairman of the Blockchain Association of the Philippines to be launched this month. UnionBank hopes to significantly grow the number of blockchain programmers from about 30 to about 100 by the end of the year, Ortiz said. This number will go up further to about 20,000 by the end of the year, he said.

Eliminate Friction

“Visa B2B Connect takes on innovative approach and eliminates friction for cross-border transactions by using distributed ledger technology to enhance the speed, security and reliability if these transactions,” Viktam Kshettry, head of business-to-business partnership at Visa Asia Pacific said.

UnionBank is also set to use the blockchain technology for some of its internal processes such as bookkeeping, distributing circulars etc.


Blockchain technology is basically a distributed ledger where transactions are recorded and distributed to several computers in the network. Every transaction is verified using these copies. Blockchain solves the double-spend problem, where one can simply produce replicas of a transaction – by requiring that transactions are recorded in a public log.

The technology removes the need for a central authority to authenticate transactions.

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