Singapore’s UOB used its first half results briefing today to unveil a new digital bank to be rolled out across five Asean markets and aiming for up to 5 million new customers. It is big on ambition, but light on timeframe specifics.
“We believe this is the right time for us to launch a digital bank,” says Dennis Khoo, head of regional digital bank and digital banking. “The difference is, this will be digital banking with a relentless focus on customer engagement.”
Khoo’s odd job title is illustrative of the strange definitions and terminology that are turning up in this sector. In his view, digital banking is something UOB has been offering for some time anyway (most obviously through its UOB Mighty, a phone-based payments system widespread in Singapore), whereas this new project is a new mobile-only digital bank, targeted in its initial stages at mobile-savvy Generation Y and Z customers.
There’s little doubt that the digital bank, once rolled out fully, will be differentiated in terms of footprint: UOB wants it to be active in Singapore, Malaysia, Indonesia, Thailand and Vietnam. The most obvious comparison, fellow Singaporean and long-time tech leader DBS, has rolled out its mobile-only digibank offering in India and Indonesia, but not elsewhere in southeast Asia.
But what about this point of differentiation on the grounds of engagement? Khoo believes that other digital bank offerings are so hell-bent on customer acquisition that they forgot about engagement. “In my experience in 17 years in the banking industry, looking at tech for 13 years… there is very little focus on engagement,” he says. “It’s hard to do.
“The big tech and fintech companies have gotten there, but the banks have had difficulty in making that happen because the building blocks have not been in place.”
"We believe this is the right time for us to launch a digital bank. The difference is, this will be digital banking with a relentless focus on customer engagement."- Dennis Khoo, UOB
UOB calls its model ATGIE, for acquire, transact, generate data, insight and engage; the last of these is supported by a dedicated engagement lab. It uses machine learning and artificial intelligence to gain a better understanding of customer preference and behaviour, and hopes that by being able to gear its offerings towards what customers need it will engender not only loyalty but advocacy, with existing customers effectively helping with the marketing by telling others.
While only time will tell if UOB can do anything differently with tech innovation to what has come before, one gets a sense of its ambitions from the partnerships it has rolled out over the past six months. First, in April, came the Avatec.ai joint venture between UOB and Pintec Technology, the Chinese financial services technology platform, which aims to bring greater efficiency and reach to credit assessment, and in turn to bring more of southeast Asia’s more than 400 million unbanked people into the financial mainstream.
Then in July UOB announced an investment in, and partnership with, the Israel-based fintech Personetics to develop the bank’s artificial intelligence capabilities in southeast Asia.
In combination, UOB hopes the partnerships will broaden the range of people it can serve in the region, and learn more about the patterns that arise from the transaction data it will receive from them.
The new digital bank aims to build a customer base of three to five million over the next five years, operating at a steady-state cost-to-income ratio of 35%; by steady-state, the bank means once the costs of rollout are completed and the business is fully operational.
However, pinning the bank down on any more precise timing than that is problematic. The announcement today was about the business model, apparently; announcements of actual progress will follow “in due course”. “We can say we will launch over the next 12 months… but not in all the countries,” Khoo says.
The announcement comes against a backdrop of strong performance among Singapore’s banks, with both UOB and DBS announcing record first-half earnings in consecutive days, in UOB’s case of S$2.05 billion achieved on a 10% year-on-year increase in total income to S$4.57 billion.
Both banks, and OCBC too, appear to have emerged from their problematic oil and gas exposure of recent years. UOB’s NPL level is steady at 1.7%.
Tougher times may lie ahead, however. CEO Wee Ee Cheong speaks of “uncertainties in the global economy, a trade war that could accelerate, and signs of a slowing Chinese economy. Closer to home, the property market may see a slowdown from recent cooling measures.
“But our diversified footprint will help to mitigate the impact of some of the macro headwinds. We continue to stay vigilant and despite near-term uncertainties we believe in the long term for Asia.”
UOB has positioned itself carefully for China-Asean flows, but those flows have been threatened recently by changing state attitudes to outbound capital from China, and some pushback from Belt and Road recipient countries, most obviously Malaysia seeking to renegotiate Chinese-funded infrastructure projects.
“The trend continues to be there and business traction continues to gain momentum,” Wee tells Euromoney. “There will be pockets like Malaysia where they cancel some projects but in an overall sense – not just in infrastructure – there is still a big flow to this part of the world. I am still confident.”