UnionDigital Bank plans to introduce high-frequency lending in 2024

UnionDigital Bank, the digital lender of UnionBank of the Philippines, Inc., plans to launch its high-frequency lending product next year, allowing consumers to avail themselves of short-term loans, its president said on Thursday.

“We’re moving to more frequent lending in shorter tenors,” UnionDigital President and Chief Executive Henry Aguda said during a media roundtable at the Singapore Fintech Festival.

“We want to make it configurable. Soon, we’ll come out with the lending on our app where you can configure the tenor. The underwriting is there instantaneously when you download your app,” he added.

Mike Singh, UnionDigital’s Chief Commercial and Revenue Officer, said that the product will be targeted towards the mass market that lives “day-to-day.”

“A lot of the gig economy is not fixed-pay. Maybe (their) expenses this month exceeded (their) income. So, (they) need a short-term loan. We want to give them the choice: you can take a loan in the morning and you can pay it off maybe in the evening if you get paid through commission,” he said.

“The faster we can collect and the shorter the tenor loan, the faster the turnaround. We have to mimic how it is (in the informal lending market). If not, they will not adapt to the structure of normal banking lending operations,” Mr. Aguda said.

The product will likely be launched in the second quarter or second half of next year.

“The first version of that maybe is a 30-day minimum but no prepayment penalty,” Mr. Singh said.

“Right now it’s monthly. We’ll move to two weeks, then we’ll do weekly, then the aspiration is on a daily basis. One month is too long for somebody in that segment,” Mr. Aguda added.

The loans will also be priced for risk and are slightly above credit card rates. “What’s good is the interest rate is not fixed to a specific cohort or product. It changes based on how risky you are,” Mr. Aguda said.

“Obviously, the cards segment has money so its lower risk. Our segment has very high risk. So, we have to price for it. But if you pay your loan, the Artificial Intelligence (AI) will read that and your score will go up so your next loan, the interest rate will be lower,” Mr. Singh added.

UnionDigital is also planning to infuse additional capital to accommodate this new lending feature. “We’re in the process now of writing up our capital requirements for the next 24 months, we haven’t placed the figure,” Mr. Singh added.

Meanwhile, UnionDigital said it is also launching a product geared towards making processing more efficient for micro-, small and medium-sized Enterprises (MSMEs).

“MSMEs, as you know, are the driver of our economy. Our vision for MSMEs is what we call straight-through processing. Automated. faceless, paperless, same-day approval. That’s another product in the pipeline,” Mr. Singh added.

With these new products in the pipeline, Mr. Singh said he expects UnionDigital’s loan portfolio to double or even triple.

UnionDigital said its outstanding loan balance has reached at least P12 billion.

The lender was granted a digital banking license by the Bangko Sentral ng Pilipinas in July 2021 and began operations in July 2022. — Luisa Maria Jacinta C. Jocson