United Overseas Bank: Plotting the Coordinates on the Road to Digital Banking in ASEAN

Dennis Khoo, Head of Group Retail Digital at United Overseas Bank (UOB) is a man with a plan. In fact, his is more than a plan, as he has a clear vision of the future of retail banking and since mid-2018 this vision is being fast-tracked by UOB to achieve the digital bank of tomorrow. Khoo met with Hubbis in April to understand this concept and to learn about the progress thus far on building the digital bank of the future.

Khoo begins the discussion with a reference to the well-documented corporate demise of Kodak. “Whatever happened,” Khoo observes, “the real lesson is that Kodak did not embrace technological change, perhaps they were too stuck on the margins offered by traditional film. The message is that we must all evolve in order to survive and to compete, and that is certainly true in banking.”

Khoo works on UOB’s key digital transformational project alongside the other senior leaders within the Bank, aligning their roles to ensure the bank is coordinated in all aspects of its future digital activities. Khoo met with Hubbis not long after UOB announced the March 1, 2019 launch of its digital retail bank, TMRW, in Thailand.

“TMRW is a completely mobile digital bank for millennials,” he reports. “It is ideal for ASEAN, which has a vast millennial population, with, I understand, more than half of the potential customers below the age of 35, which means roughly 400 million customers. Of these customers, the majority have a smartphone. ASEAN is also ideal for achieving scale because so many working adults still do not have a bank account. Given that Thailand’s digital generation make up one-third of the total Thai population, we decided on Thailand as the first country to roll TMRW out in the region.”

Khoo notes that UOB has been very successful in building its presence in the region, but that the time and capital cost of building the branch route to be able to compete with incumbent players, as the bank did in Malaysia over a period of 60 years, can be slow. “In the new world, for large countries such as Thailand, Vietnam and Indonesia we have to adopt the digital approach,” he reports. “We see that by that lowering the cost to serve customers and making banking more accessible for them will drive large-scale financial inclusion in this region. The future of retail banking will be influenced by new entrants in financial technology (FinTech), by technology, by new challenger banks and also by incumbents who are reinventing themselves.”

Engaging the customer via ATGIE 

At the heart of UOB’s Digital Bank customer engagement approach is its unique data-centric business model, expressed through the acronym ATGIE, which represents five stages: Acquire, Transact, Generate data, Insight and Engage. “This model,” says Khoo, “is designed to address the entire customer life cycle comprehensively, ensuring the quality of each encounter is engaging and deepens relationships.” 

UOB’s ATGIE business model is powered by next-generation artificial intelligence, machine learning, data analytics, user interface design and smartphone capabilities. These include UOB’s own digital technology innovations, its own regional Engagement Labs (eLabs) test and learn initiative to deepen customer engagement, as well as solutions provided through its collaboration with FinTech partners including Pintec Technology, Personetics, and Meniga [see our associated ‘On the Fast Track’ article].

“As expressed through ATGIE,” Khoo elucidates, “the customer experience starts with swift and simple onboarding which is localised to each market context. As customers interact more frequently, our Digital Bank will gain a better understanding of their preferences and behaviour patterns. Over time, the deeper insights drawn would enable the bank to anticipate customers’ needs, to determine how it can best help them and prompt them towards smarter spending and saving habits for them to achieve their financial goals. This, in turn, would encourage even more exceptional customer engagement, loyalty and advocacy.”

Building the talent pool

To accelerate the Digital Bank’s initiatives in the region, such as the bank’s in-house eLab initiative, UOB last year also launched a talent search to hire passionate and like-minded people. The new hires will join the 120-people strong team already working on the roll-out of UOB’s Digital Bank across ASEAN.

“In October last year, we stated our intention to increase our Digital Bank team by at least half this year,” Khoo reports. “Of these new hires, a quarter will join the eLab. Other roles include those in areas such as user experience and user interface design, behavioural science and research, data analytics and design thinking.”

The bank has also been increasing its team of technologists, such as software engineers and architects, to develop solutions such as in-house application programming interfaces (APIs), which tap UOB’s secure IT architecture to drive real-time data analytics. Around 45% of the new talent will be located in Singapore. Positions will also be available in Indonesia, Malaysia, Thailand and Vietnam.

Holding on to the customer

Digital, Khoo adds, is however not merely about technology, which is available to anyone, at a cost. “As we see it, this really is all about how you retain the customer after you have acquired them,” he observes. “Accordingly, what we are so intently focusing on is the experience, so that customers who try it will stay and then become advocates for us, for the digital bank experience, and this will then reduce the cost of acquiring new customers.”

Khoo mines deeper into the costs. “We deal with three types of costs, the cost to serve, to innovate and to acquire. The first of these, the cost to serve, for a mobile-only bank like TMRW is very low because there is only one channel – the mobile phone.”  

However, the cost to innovate is very expensive because each new project comes with a large capital cost and there is both depreciation and rapid obsolescence. “After only one or two years,” Khoo notes, “a competitor arrives with some new offering for customers. That is why we have plugged different fintechs into our digital journey as we believe collaborating with fintechs can lessen the cost of innovation significantly.”

Then the only other element is the cost to acquire. “That cost to acquire can only come down if people want to switch, so that is why we are intensely focused on engagement. To help create more engaged experiences, we work on data categorisation with Meniga, a company that works a lot with the big French banks. We pump the categorized data to Personetics, an insights company that is one of the big players in the cognitive banking and engagement. Digital engagement is very nascent, globally.”

Keeping things hygienic

Khoo adds that he views transparency today as one element that must be offered to customers as a matter of pure ‘hygiene’. “I think bankers have an obligation to society, and that requires transparency. We are confident UOB’s focus to offer a transparent and engaging banking experience for customers is headed in the right direction, and is crucial to customer acquisition and retention.”

Khoo reports that UOB is indeed achieving much of this so-called ‘hygiene’ today. “We are making good progress with the simplicity of processes and the ability of chatbot and live chat agents to solve customer problems,” he says. “And we are going to gear up significantly so that we can solve customer issues even faster within the next three years. We are not there quite there yet, but we see that the machine-learning improvements across many areas  are quite remarkable.”

But Khoo says that the journey towards the digital bank of the future should not be seen as instantaneous. “When we envisaged TMRW,” he explains, “we had the millennial generation front of mind, as they live their lives very differently from earlier generations. They want more transparency; they feel banking is full of complex, unnecessary jargon. We might not yet have fulfilled all our ambitions, but we have certainly simplified many areas, eliminating jargon, making fees much more transparent, cutting out the small-print, being clear upfront, for example on fall-below fees. In short, we are committed to being simple, engaging and transparent.”

Step by step

In the future, Khoo hopes to boost the bank’s ability to tap data to harness insights on services and solutions that might be even more relevant to the customers. “For example,” he reports, “we are looking at being able to understand the kind of merchant offers a customer might be interested in, and send those offers, perhaps for example in some form of coupon format.”

He explains that this is all about personalising the user interface. “In short,” he says, “we can push the simplicity even further, to create an even better experience by adding other data to transactional data and making our responses even richer. Of course, we are also going to look at expanding the product category as well, perhaps into insurance, loans, and so forth, but in the digital bank right now we are focused on offering a transactional account, a savings account and a credit card. We need the stickiness first, before branching out with other products and offerings.”

The path to differentiation

TMRW, Khoo also concedes, is a challenger bank whose progress will to some extent be determined by regulation. “The Digital Bank as we imagined it and created it has the opportunity and the runway to grow,” he comments, “but we also know that the banking industry takes a long time to change, even with technology, because it is a heavily regulated industry where security and customer safeguards have primacy”

He closes by remarking that commercial bankers need to learn the dangers of being insular in this new world that we all live in, a world in which new competitors can emerge from outside the financial industry and where technology plays such a big role. “We need to take a playbook from the challenger companies, from Amazon for example,” he remarks, “to more fully understand how to truly differentiate ourselves for our customers.”

If UOB can do exactly that – and the path it is on appears highly promising – the bank will be well placed to achieve its stated goals…and perhaps maybe more.