Challenger bank for Filipino immigrants gets assist from East West Bank

For most challenger banks, the identity of the underlying institution that holds deposits is buried in fine print. For East West Bank and BayaniPay, the relationship is front and center.

BayaniPay, a digital remittance service that connects the U.S. and the Philippines, debuted in California in November 2021 with no-fee remittances. On March 16 it announced that it is launching a challenger bank for Filipino immigrants called BayaniPay Wallet. East West Bank, a unit of East West Bancorp in Pasadena, California, holds the deposits. The $60.9 billion-asset institution has branches in both the U.S. and China. Its partnership with BayaniPay marks its first foray into banking as a service.

The unusually strong presence of a traditional bank alongside this new challenger bank could benefit both.

“We have been exploring new ways of growing our business,” said Parker Shi, chief operating officer of East West Bank. For the bank, the partnership is one way to further its mission of providing low-cost banking to underserved communities and expand to new geographies and customer segments.

BayaniPay Wallet combines the remitter’s understanding of the Asian American community and their cross-border financial responsibilities with East West’s digital banking services, compliance knowledge and customer service. The East West logo joins the BayaniPay brand name on the app and debit card, which the bank helped design.

“East West Bank didn’t look at us as a wholesale customer,” said Winston Damarillo, CEO of BayaniPay.

The partnership was a good fit in other ways.

“The geographic footprint where Filipinos live in the U.S. overlaps well with our existing branch network,” said Shi. The bank has branches in Los Angeles and San Francisco, which were the top two U.S. metropolitan areas by Filipino population as of 2019, according to Pew Research Center. This overlap is important because BayaniPay checking-account users can walk into East West branches for assistance in addition to calling BayaniPay’s customer service.

“We have been actively training [staff in] our branches to make sure if a customer from the BayaniPay partnership comes into a branch, they will be treated exactly the same as any other East West Bank customer,” said Shi.

Francisco Alvarez-Evangelista, an adviser at Aite-Novarica Group, notes that in the last few years, more traditional incumbent banks have become interested in partnering with fintechs. If they leverage their branches as East West has done, it could be a help to challenger bank customers.

“There are pain points with high wait times when calling challenger banks or other issues that can be very frustrating,” he said. “The fact someone could drive 20 minutes to go to an East West location to solve a problem is significant.”

A number of challenger banks for immigrants to the U.S. have launched within the last few years, including Majority, Simba and Stilt. Unlike most, BayaniPay focuses on a specific immigrant group, and one with a significant presence in the U.S. According to Pew Research Center, U.S. Filipinos are the third-largest Asian origin group in the U.S. and their population has steadily climbed over time, from 2.4 million in 2000 to 4.2 million in 2019. The majority of Filipino Americans are foreign-born, which suggests they may still have attachments to their countries of origin, said Neil Ruiz, associate director of race and ethnicity research at Pew Research Center. On top of that, the Philippines was one of the top five remittance recipients in U.S. dollars in 2021, according to the World Bank.

BayaniPay and East West are taking steps that most remittance services and sponsor banks do not when targeting immigrant populations. BayaniPay is connected to a large Filipino financial institution for remittance, BDO Unibank, that may be familiar to and give it a sense of legitimacy among its target audience.

“It seems to be a very culturalized approach by people who come from this community themselves,” Alvarez-Evangelista said.

When surveying the Filipino American community, Damarillo found that immigrants wanted to send money home as easily as they could shoot transfers to another person via PayPal. “Bayani” means “hero” in Filipino and is often used to describe global professionals who work abroad to support their families back home.

It was important to Damarillo that users not pay remittance fees, which globally average 6.3% of the amount sent. Instead, BayaniPay makes a small margin on foreign exchange rates. It will also make money on transaction and banking services, such as a percentage of cash-back earnings.

BayaniPay will save money on merchant transaction fees by partnering with some merchants, such as North American Filipino supermarket chain Seafood City, to enable direct payments. This service will become available in the summer. BayaniPay users will be able to present a QR code to enable payment from their bank account to the merchant’s bank account.

The challenger bank will be available in the spring as a progressive web app, a type of software that's delivered through the web, on smartphones, tablets and desktops to California residents before rolling out to other states. It will offer a no-fee checking account and debit card with cash back. Checking account users will be able to transfer money to the Philippines within 12 hours, compared to 24 hours for other users. Later, the company plans to personalize perks and offers based on the customer’s buying patterns, and eventually expand to other immigrant groups.