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How UOB will position its digital bank

Dennis Khoo, head of digital at the Singapore bank, explains the strategy behind the ASEAN rollout.



On the eve of rolling out its mobile-only bank offering across Southeast Asia, United Overseas Bank is still looking for fintech and consumer-facing partners.

“We need partners who can help us engage with the customer, and who are data-centric,” said Dennis Khoo, head of regional digital banking in Singapore.

The bank recently announced it will launch a mobile-based digital bank in five markets, but hasn’t confirmed the timing or revealed the brand name for the new service. The service will be available in UOB’s existing traditional markets of Singapore, Malaysia, Thailand and Indonesia, and will spearhead its arrival in Vietnam.

Mobile-only and plus-mobile
UOB is actually deploying two new digital services. The first is the mobile-based bank for millennials and Gen-Zers. It is also upgrading its conventional service to extend the digital reach to its existing (older) customer base. Khoo says it is self-defeating to try to target young people with a traditional web-based banking service – the mobile offering may be limited and more transactional, but the user experience is better suited to this world.

“You need two business strategies,” he told DigFin.

It is working with three third parties to realize its digital-banking ambitions. It launched a joint venture with Beijing-based Pintec Technology Holdings to assess the credit of individuals or small businesses, particularly those lacking a conventional credit history.

It has invested in Personetics, an Israeli artificial-intelligence company that draws insights from transaction data in order to serve customers with personalized recommendations.

And it is using the services of Meniga, an Icelandic fintech, to consolidate customer data and categorize it by types of transaction, in order to serve up personal financial services.

Consultancy BCG provided the bank with research and a steer on strategy.

“We are heavy on engagement,” Khoo said. “How do you use data to engage customers, and get them to transact? How do you use it to create insights?”

UOB’s digital bank will kick off as a mobile-only service. “It’s easier to create a model focused primarily on engagement through mobile,” Khoo said.

Engagement from transactions
Although the bank is teaming up with a variety of partners, Khoo says the business strategy is not like a fintech’s. Startups typically seek fast growth to generate a high equity valuation. “UOB has an 80-year history,” Khoo said, with the branches and employees to match. “We need to define our history digitally,” which means expanding the partnership list and turn these projects into revenues and growth.

But when it comes to products, the digital bank will emphasize quick and frequent transactions. For now, at least, it won’t offer wealth management, and it will be selective about underwriting credit. Instead it will start with unsecured loans.

“Our customer acquisition strategy is to build revenue pools in unsecured lending,” Khoo said. A new digital bank doesn’t have the deposit base to sustain longer-term loans, so it has to build up transactions first. Transactions aren’t just to earn some fees: they are fundamental to generating the data that can lead to customer insights, and then personalized offers.

“We have a lot of transaction data,” Khoo said. But the fintech partners will add to that.

Anyone signing up to the mobile bank will have to agree to sharing a lot of information – such as Facebook interactions, which the bank will use to help assess credit risk and price products. This is being done by yet another fintech that Khoo declined to name.

UOB didn’t suddenly decide to launch a mobile bank. It first had to spend several years addressing its legacy core banking systems. The I.T. that powers its credit card, deposits and other businesses could not simply be replaced. The bank invested in equipping it with a middle layer of technology via which departments could connect through APIs, in order to call up data or functions regarding customer transactions. Then departments could write apps to enable them to use this internal data.

“We have new capabilities to pull data from our infrastructure and categorize it,” Khoo said.

He acknowledges the bank is still learning what will work on a purely mobile service – another reason to limit the products to simple, transactional ones. But UOB is also trying to be as pure as it can be with the new digital bank. For example, perhaps given internet search functions, it doesn’t need to also provide customers with a PDF of their account statement.

“We haven’t yet removed statements,” Khoo said, noting that customers may still expect them. “But we don’t think they’re needed.”

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