AIBP ASEAN B2B Growth
AIBP ASEAN B2B Growth
Rizal Commercial Banking Corporation (RCBC): Spearheading Innovation and Digital Financial Inclusion in the Region
Guest: Lito Villanueva, Executive Vice President, Chief Innovation and Inclusion Officer, Rizal Commercial Banking Corporation (RCBC), and Chief Digital Transformation Advisor, Yuchengco Group of Companies (YGC)
In this episode, we discuss Sir Lito's journey in driving digital financial inclusion in the Philippines and in the region, and how public-private partnerships can play an imperative role. Drawing on his extensive experience in various leadership positions, we further dived into what "innovation" means and how can it be measured. Sir Lito also shares his thoughts around digital trust and cybersecurity efforts, which have gained importance as a result of increased digitalisation efforts across most enterprises.
Founded in 1930, the Yuchengco Group of Companies is a Philippines conglomerate and has a diverse portfolio spanning banking, insurance, construction, and education. Rizal Commercial Banking Corporation (RCBC) is the financial flagship company of YGC, and is listed on the PSE with a current market capitalisation of USD 13.95 billion.
The AIBP ASEAN B2B growth podcast is a series of fireside chats with business leaders in Southeast Asia, focused on growth in the region. Topics discussed include business strategy, sales and marketing, enterprise technology and innovation.
YY - AIBP:Hello, and welcome to the ASEAN B2B growth podcast where we sit down with individuals responsible for driving growth within their organizations here in Southeast Asia. My name is YY, and I'll be your host for today. Today, we have somebody very interesting joining us. And what he's doing is not just specific to the Philippines banking sector, but rather looking at the whole idea of financial inclusion in the region and globally. Without further ado, I'll have Sir Lito Villanueva, the Executive Vice President, Chief Innovation and Inclusion Officer of RCBC and the Chief Digital Transformation Advisor for the Yuchengco Group of Companies, to introduce yourself. Sir Lito, please.
Sir Lito - RCBC:Thank you so much, YY, and thank you for that generous introduction. And of course, it's an honor and privilege to be part of this podcast of AIBP. And I'm also very pleased to be sharing some recent insights or some good news about what's happening in the ASEAN region, or even the Philippines, pertaining to inclusive digital finance and other digital innovations. Thank you.
YY - AIBP:Thank you so much Sir Lito, you know, can you share with us a little bit more about your background, how you got to be where you are today, and what really stoked your interest in driving digital finance, digital financial literacy, in your role.
Sir Lito - RCBC:Of course, without disclosing the age, I've been in the business or in this particular field for almost over 20 years. And in fact, you know, my undergrad is not really into finance, because my undergrad was on political science. And I have two graduate degrees, one is on Master of Public Administration, where I graduated Magna Cum Laude from the University of Santo Tomas, and another graduate degree on the Master in National Security Administration. And, of course, I have executive courses in the University of Cambridge on Innovation by Design. But the thing is that, I was so, you know, thrilled with the way things are insofar as having to provide innovations in and being able to address some of the pain points of most Filipinos, right. And the thing here is that even prior to me joining, for example, RCBC, I've been with IFC as a consultant, and doing quite a number of initiatives, specifically focusing on cross border transfers, specifically for Mongolia. And also with Visa, and covering about 34 markets, you know, specifically in Africa region, in Middle East, some parts of Eastern Europe, of course, Asia. And it's, of course, interesting to be able to see why use implementations of mobile technology or the time you were talking about mobile financial services. The word digital is not yet the buzzword in those years, but we're calling it as mobile financial services. It was only about about six or eight years ago, that we started calling it digital financial services, for mobile financial services. And we've seen that evolution and you know, I've been most involved with the SEC, because it was a team from Smart, the leading telco in the Philippines, under PLDT. It was actually the first mobile wallet that was actually launched globally, and that is Smart Money. In fact, Smart Money was the first in the world, a pioneer, or even prior to M-PESA, which was launched in 2004. Smart Money was launched in the year 2000. So, we have seen that, I mean, we have seen how technology could definitely change the landscape, specifically for developing markets. And we are very lucky the Philippines for example, has a very progressive, dynamic and forward looking regulators and promoting, you know, enabling regulatory framework that will further promote innovation towords inclusive digital finance, or towords dealing with or accelerating, inclusive digital finance. In fact, now we're seeing the fruits of those things, wherein, the BSP, or the Bangko Sentral ng Pilipinas, came up with its own digital payments transformation roadmap, wherein it has two outcomes, or two goals, that by end of 2023, or by the end of this year, at least 50 percent of the financial transactions must be in the form of digital, and 70 percent of our, sorry, 70 percent of our financial consumption has been from digital, and 50 percent of our other Filipinoes will be part of the formal financial system. And the good news is that we will be able to meet those goals this year. So that's why, it's a whole nation approach, whole of nation solution, wherein all stakeholders are in unison towards creating a sustainable digital economy for the Philippines. So, you know, to answer your question as to how I was able to, you know, to thrive in this field, in this discipline, is because of those experiences that I had, before with Visa, with IFC World Bank, even The Economist, I started my career as a senior research associate, an associate editor for The Economist, and doing analysis and doing writing, doing, you know, all of these things, and being able to really capture the essence and also having to discover what are those pain points and how to address those friction towards having to have that, you know, that honest-to-goodness development in those local communities. And I think, yeah, practically having to also have experience with banking, because it's also, my first banking experience was with Land Bank of the Philippines doing global banking. So doing remittances, cross-border transfers, et cetera. And yeah, so that's why it's a sum total of all of those experiences. And now that I'm here with RCBC, we've seen the exponential growth of RCBC as well. You know, RCBC used to rank number eight, in terms of assets, way back in 2019. And the good news is that as of this month of 2020, sorry, 2022, December, we ranked fifth amongst the largest private universal banks in the Philippines in terms of assets. So just imagine from nine to fifth. Right, so it's a major, I mean, and of course, we congratulate all the men and women of RCBC, of course led by our Chairperson, Helen Yuchengco-Dee, and our President/ CEO, Eugene Acevedo.
YY - AIBP:Thank you so much, Sir Lito, for giving that overview. I think I was going to ask you to talk a little bit more about RCBC for our listeners who may not know about RCBC, but I think you've mentioned about your journey of moving it from eighth to fifth in terms of asset sizes. And that's a very sizable move. How about your role as the Chief Digital Transformation Advisor for the Yuchengco Group of Companies? Can you share with us a little bit more about what the Yuchengco Group of Companies are, to the listeners who may not be familiar with that?
Sir Lito - RCBC:Yes, Yuchengco Group of Companies, or YGC in short, is one of the oldest conglomerates in Asia, and it has quite a number of business interests now. They are into banking, insurance, real estate, renewable energies, construction, education. You name it and they practically have it, and an even you know, even Memorial estate right. So, these are the things that the YGC would have. And of course, you know, given that it is run by our very dynamic chairperson Helen Yuchengco-Dee, she saw, you know, the need, the necessity of having to push for digitalization inside the conglomerate, right. Because at the end of the day, digital is not just a lip service thing, that is not just being discussed in boardrooms and having that very limited air time, but it is now a must-have for everyone, right. So having to even, you know, orient or "educate", the members of the board of every company inside YGC, on digital transformation and being able to embed it, not just knowing it, but practically practicing it, right. So because, you know, you really have to embrace it, embrace digitalization, for you to be able to appreciate that. And you'll be surprised that while most of our members of the board of directors will be seeing, these are people who are in their senior years, but of course, seasoned, and because of their expertise and experience in various fields, they are, you know, they're part of our various boards, but you'd be surprised that they are being educated as well in their homes, by their grandchildren, or their younger children, about, you know, about digital, about having to use your mobile app, et cetera. And we now saw that is really a necessity, right. It's not just a, it used to be a special project in most of the companies prior to pandemic, but because of the global health crisis, practically not just bad, but practically, across all segments and sectors or industries, they have seen the relevance, the impact, and the necessity of having to adapt to digital transformation. And that is actually, you know, it's now, you know, again, it is really part and parcel of the survival of any enterprise.
YY - AIBP:Understand. I like how you've mentioned, so it has moved from good-to-have to kind of need-to-have in any organization, but I think when we look at innovation, or we look at digital transformation, it means different things to different people. So I'm quite curious, in your role at both RCBC and at YGC, what does innovation mean to you and the team? And how do you measure success of innovation efforts?
Sir Lito - RCBC:Very good question. You know, innovation is not a monopoly of one person, I may be the Chief Innovation and Inclusion Officer for the company, but it doesn't mean that it has to emanate from me, all the time. Every employee, regardless of rank, regardless of age, regardless of gender, in any organization has to be an innovator, because innovation is about collaboration, innovation is about community, innovation is about sharing, innovation is about you know, partnerships, right? So, innovation is not just inside the company, innovation is also externally, right. So you have to, you know, you have to partner with quite a number of entities, and even, you know, sectors or industries that may not necessarily be aligned with your industry, because having to discover what would be the solution to this pain points, being you know, being experienced by your target market would be something of value to them, because at the end of the day, it's about value, finding your value in the chain, and in that in that value chain, right. So in having to really realize that being different or being, you know, standing out from the clutter, or, you know, and you know, and having to have that UVP or unique value proposition, as we call it, would be, you know, would make you really thrive and survive in a very, you know, very competitive landscape. Right. So that's why innovation for me is something that has to be you know, has to be nurtured. Innovation has some something to be, you know, shared across everybody. And innovation is something that has to be so simple. It doesn't have to be so complicated because you are not in your office or you're not in organization to impress people. You are not there to wow people, you are there to let people understand your message, understand what you are communicating. And if you can actually make complex things simple, then you are successful. If you can make complex things simple and understood easily by your target market and you can actually do it with speed and skill and traction, then you are successful, because it's not about supply driven proposition. It's about demand driven proposition. Because you are not there to, you know, you may have the sexiest app in the world, you may have the most robust platform in the world. But if no one is using it, because there is a disconnect in the first place with your target market, then it is a failure. But again, failure, as they say, is not fatal, right. Because failure will definitely make you much stronger, and be able to empower you to be able to stand up every time you call, and be able to recalibrate and tweak that feature or that product, and ensure that as you go along, you can now improve the customer journey. Because remember, you are not there to launch a product in full, meaning you don't wait for the time that"Hey, we cannot launch a product because we're just 80% or 80% done or 50% done or 90% done", you know, you can launch it, and you can actually iterate it along the way. Because you wouldn't know that even if you're 100% sure already, that you can launch it now. You know, by the time you launch it commercially, or publicly, the moment you know, you will definitely hear feedback from your customers. And you will again, go back to the drawing board or you know, in your wire room to make sure on how to tweak some of those features, right. So I mean, let your customers be part of your iteration process, that's part of agility or being agile, right? So you just have to be flexible. And you always have to put yourself in the course. You always have to empathize with your customers. Because for example, I've been telling my people, I mean, you have to don't wear your hats as product, product manager or as operations head or, or marketing head, et cetera. Always put yourself as the customer. So what are the nuances, what are those pain points, what are those things that will make them happy? And what are those things that will make them use your product?
YY - AIBP:Understand, I like how you've mentioned. So innovation is not centered on one person, you have to democratize innovation, so anybody can come up with good ideas. I also like how you've mentioned, it's not so much supply driven, the best product may not win the entire market, it's really about the demand driven, right, you need to create a product, develop a MVP, and then we iterate this whole process with your customers and taking a very customer driven approach. I like that very much. If I could ask a more difficult question. You know, we've talked a lot about how 2023 is a more challenging economic climate, where resources may be a little bit stretched, in order to do all the innovative efforts that we will want to do. How does the team actually kind of prioritize what kind of efforts would take priority or would take precedence in a climate like this?
Sir Lito - RCBC:Yes, you're right. 2023 is a very challenging year for everyone, globally, because of high inflation, because of geopolitics and large economic uncertainties. Right? And definitely, it's more, it's really more about having to assess, which of those things that would be prioritized by your organization or your group, by your team. Because, you know, without you having to look so far, there are quite a number of low hanging opportunities before your very eyes. Right. So I mean, this is something that you wouldn't even pay attention to or wouldn't be aware of, because you're so mesmerized, so preoccupied with quite a number of other non priority items, as we as we may call it, but I think is there are quite a number of low hanging opportunities, which you could without you having to invest so much, it is a matter of tweaking something and being able to capture that particular segment. Right. So again, it's really more of, again, having to have that 360 degree perspective, or help with those opportunities and being able to scan the environment on which are the things that would really matter to your customers and what would really make, you know, that value, not just for your company, not just for your group or your team, in terms of having to achieve financial metrics for you, but also how would impact the lives of those people who you are trying to tap.
YY - AIBP:And if I could, I'd like to dive into your other roles because beyond just driving, say, the digital transformation at YGC, or the being the Chief Innovation and Inclusion Officer at RCBC, you wear many other hats. And I'm very curious, you know, personally how you actually manage your time. But tell us more about your other roles. I believe you are also working together with quite a number of organizations, including being the Chairperson of FinTech Alliance dot PH. And you're also the Chairman of the Alliance of Digital Finance Associations globally. Can you share with us a little bit more about these roles? And what how does it all come together for you?
Sir Lito - RCBC:Yes, I think I have more than 24 hours a day, to meet this demand, right? So yes, I wear multiple hats. And then of course, I just spoke about, you know, my stint with RCBC. And, you know, the organization that pays my salary, but those organizations that do not pay my salary, but it's more, how to say it, it's more of advocacy-oriented and more of policy, you know, definitely policymakers. It's more of being able to advocate for policies that would support the industry, it's something of value definitely to everyone in the ecosystem, right. So I'm the founding Chairman of Fintech Alliance dot PH and that is the organization, the largest digital organization in the Philippines, with over 80 corporate members. And collectively, it now contributes to over 90% of financial digital transactions in the Philippines today, right? I mean, and of course, from start ups to unicorns. These are companies digital FinTech companies that comprise the FinTech Alliance dot PH. And we are being tapped by regulators, government agencies, even policymakers, including legislators, when coming up with, you know, initiatives and regulatory you know, or legislative issues on bills in both houses of Congress, that will impact on how collectively we could promote the digital economy in the Philippines right. So in terms of digitalization, in terms of having to push for some reforms, when it comes to cybersecurity, consumer awareness, et cetera. And Fintech Alliance was also the first organization in the ASEAN region that came up with an industry led code of conduct and code of ethics. This is, again, to support the regulators in terms of having to police the ranks amongst FinTech players to ensure that there is, you know, massive campaign when it comes to consumer protection, right. So that's why every member who is applying, every company, who is applying for membership of Fintech Alliance would have to go through a scrutiny test in the membership committee, in terms of proper vetting, in terms of them having to comply with all documentary requirements. In fact, some of those companies that have been applying for membership with us, they've been telling us that we are more stringent than regulators. Because again, we are aspiring to become an SRO or self regulating organization. And of course, we have to make sure that every member of the organization is definitely, you know, deserving or fully vetted by the industry, right. And in fact, there was one case where we had to expel one member of the Alliance, because of gross violation of the data privacy act. So that's how we can, again, Fintech Alliance is not a social club. It's not meant just to have parties or to have whatever. But it's really more about, you know about policies, about reforms, about advocacies, and about having to support government to further promote financial inclusion in digital economy. And the next item is me being also the first Chairman to be elected by the South African-based Association of Digital Finance Associations, and majority of those members, are FinTech associations that are based in Africa. So and the good thing is that this you know, Alliance of Digital Financial Association, it's also comprised of other members of the board, who are part of the Bill & Melinda Gates Foundation, or even other development agencies in Africa, and, yeah, so that's why we are also excited about how we can, you know, we can help each other in the industry on having to show some of the global best practices. And also, you know, learn from various markets and how it can be applied in markets that would, you know, that would really need those innovations, right. Again, it's not about, you know, not just having a one model type of implementation in across all markets, but certainly more, which are those models could really be something that could be that could be repackaged to be, you know, reassessed, and how it will now conform with a particular market in terms of nuances, in terms of culture, in terms of behavior, etc. So those things, that's why the exchange of ideas and experiences amongst those members would definitely be of value to everyone.
YY - AIBP:Understand, in your experience, right, under what circumstances do public-private partnerships work the best? You've talked a bit more about how, you know, you've been very thankful to BSP in being very forward thinking in driving financial inclusion. What are some of the factors that you see in your roles that really helped to make the circumstance perfect for public-private cooperation when driving financial inclusion?
Sir Lito - RCBC:Yes. For you to be able to successfully drive financial inclusion or scale inclusive digital finance, it's really about PPP or public-private partnerships. Because again, the private sector cannot do it alone, nor the government can do it alone. It is really a synergy of sorts, it's really about collaborations, it's about revision of courses, right? And how you could help that combined forces would not be able to provide that development or support to those sectors. Right. So for example, for RCBC, Moneybella Barangayan Banking, you know, even the governor of the Bangko Sentral ng Pilipinas, the Secretary of Finance, and all the other government agencies, threw their support towards that initiative. And again, it's all about having to have that collaboration, even not just from the national government agencies, but as well as with local government units. And now we're actually going around the country and in all of those Barangayans, we are now being able to, you know, to reach them, and remember in the Philippines, we are comprised of more than 7,100 islands right. And the thing here is that you have quite a number of geographically isolated in disadvantage, but even conflict areas, where banking may may be an issue or a concern. So, we are, you know, the only the only bank right now, the Philippines has the most expensive bridge in the Philippines covering only two provinces using our ATM Go handheld devices, because more than 60% of our financial transactions being transacted in the RCBC ATM Go terminals, are CCP grants coming from government. So, just imagine without having to go to travel, you know a minimum of 10 kilometers to the nearest town to withdraw cash from any brick and mortar ATM. You know, this, this ATM Go terminals are actually situated in their communities. We call it neighborhood ATMs, where they could not just withdraw cash but because also transact such as get their T-loans or pay their bills, or do bank transfers, and even deposit or cash in, and even take out a loan or apply for a loan using that facility. So I mean, this is something of value for, you know, for all our partners. And it's really again, providing that convenience.
YY - AIBP:Understand. You know, Sir Lito, we've talked a lot about like the opportunities there right? AIBP ASEAN Innovation Business Platform, we actually do this annual enterprise innovation survey, where we look at challenges in digital transformation. So one of the challenges that enterprises in Southeast Asia have mentioned in their digital transformation journey, it's really about cybersecurity and privacy concerns. And this was something new that we discovered last year, as, I guess, the enterprise has become more mature, this becomes more of an issue. You've shared also about your interest in building digital trust, can you share that a little bit more about your perspective on cybersecurity, and how it links to digital inclusion?
Sir Lito - RCBC:That has been a concern of all right? It is not, you know, it's not just confined in in banks or fintechs, but it's practically confined across the value chain or the ecosystem. Because even for example, even customers, right, because even the customers have to be educated when it comes to cybersecurity, right, because in most cases, the courses abroad would emanate from customers, right, for example, them not knowing that they are actually sharing their one time passwords, right. So they are being fooled by, you know, by whoever, whoever would be sending their assets or whoever sending SMS or emails to them or what we call the phishing, and there's quite a number of fraudulent activities or acts by fraud actors. I mean, in most cases, it would emanate from the customers, because again, we are not even aware of, you know, easily fooled right or gullible, right? And that's how sophisticated hackers are, or how sophisticated these cyber criminals are, in being able to really pull our customers. But the thing is that we have to put so much premium on consumer education, specifically on how they could protect themselves with those hackers, and how they can have that digital hygiene as we call it, right? On how, you know, not just, it will not just be the banks or FinTech players that would have to be doing its job in terms of having to, you know, protect its, you know, protecting its system, protecting its platforms, and having to provide that, that, you know, that premium on consumer education. But again, you really have, again, it's an ecosystem, it's again, the whole of nation approach in terms of having to provide that, that education or awareness, right, because I mentioned digital trust. I mean, this is something that, you know, that has to be embraced by everyone, especially the players in the industry, and how to even, you know, again, making sure that it redound to the benefit of every consumer that you have, right. So, again, we are, you know, the older players are united when it comes to combating fraud, combating cyber crimes. And in fact, again, this is not just the players themselves, but also the regulators, as well as consumers, media, et cetera. So everybody shouldn't be involved in terms of having to further protect every consumer.
YY - AIBP:Well, thank you very much for your insights, Sir Lito. One last concluding question. We've talked a lot about ASEAN as a bloc. And this is something that we look at the growth story of Southeast Asia, one of the things that many people are very excited about is the ASEAN cross border linkage, where payments, digital payments can now travel across Southeast Asia easily. What are your thoughts around that? And what are some of maybe your perspectives about growth in Southeast Asia?
Sir Lito - RCBC:Yes, I mean, there's so much, you know, good things happening now within the ASEAN region, and one of those would be that MoU signed amongst governors of central banks from various ASEAN member countries, and starting with five, right. And the thing here is that, the good initial step is that amongst regulators, we have agreed on having to come up with that sort of a consortium like partnership or collaboration where cross border transfers would now be equal to thrive in this particular ASEAN bloc, right. The thing is that because of digitalization, because of you know, digital payments, et cetera, especially for Philippines, among amongst those ASEAN markets, I mean, Philippines will be the fourth largest, the fourth biggest inward remittance destination right after China, India, Mexico, right, and the Philippines right. And we are growing our remittances volume by as much as 5 to 8%, despite the pandemic. So, I mean, definitely we will, the Philippines will benefit so much from this collaboration amongst these, you know, these various central banks in having to promote cross border transfers or cross border payments, right? Because remember, if we mean, it could be, it could be a delight for a migrant worker, for example, a Filipino migrant worker in, say, in Singapore or in you know, in Indonesia or whatever, just by clicking, you know, just by clicking there or tapping their mobile app, they'll be able to send to another mobile app in the Philippines. Right, so it's an app to app, you know, transfer. So without in that practically now reduces the cost of transfers, and that again, would redound to the benefit of the consumers, right? Because the primary objective is really on how to reduce intermediary costs, and at the same time, how to promote the efficiency and convenience in making those digital financial perceptions.
YY - AIBP:Thank you so much Sir Lito, it's our honor to host you at our ASEAN B2B growth podcast. And we look forward to further collaboration with RCBC, with FinTech Alliance PH, and in driving the digital financial inclusion in the Philippines and in Southeast Asia. Thank you very much Sir Lito.
Sir Lito - RCBC:Pleasure. Have a good day.
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