Speed is the name of the game at United Overseas Bank (UOB), as it races to reach the region’s growing digital and affluent base while improving personal banking services for its existing users.

“If I were to characterise the past one year in one word, it would be ‘speed’ — the speed at which things move forward in the banking industry and the speed at which UOB has moved as well,” says Kevin Lam, head of TMRW and group digital banking at UOB.

Lam spoke to The Edge Singapore just days after a bold merger of its digital banking products. On Oct 13, UOB brought the innovation of its digital bank TMRW with its UOB Mighty digital app into one platform, UOB TMRW, which sports a dynamic user interface and user experience, a transparent rewards system and sharper insights that are personalised to match users’ lifestyles.

See: UOB enhances banking for TMRW with $500 million investment

Notably, UOB only mooted the idea in May. “From concept to launch, we were able to achieve it within four months. Typically, software development in regulated industries such as banking is a lengthy process that can take up to a year. But we did all this within just four months based on our agile ways of working,” says Lam.

UOB TMRW comes as the bank ramps up investment into digitalisation. UOB announced on Sept 29 that it will invest up to $500 million in digital innovation initiatives as it seeks to double the retail customers it serves digitally to more than seven million customers across Asean by 2026.

“Our aim to serve three to five million digital-only customers remains. The target of seven million digital customers includes those who are digital-only, as well as our omnichannel customers,” says Lam.

This time last year, Lam spoke about a different kind of speed: that of digital adoption. Then, the world was just six months into the Covid-19 pandemic, and UOB was working hard to grow TMRW.

See also: UOB reaches young professionals in Asean with TMRW

Targeting “digital natives”, TMRW is UOB’s digital-only bank, launched in Thailand and Indonesia.

With movement restrictions and social distancing measures rolled out across the world, people quickly shifted online. “We found many data points for people above 60 — previously, not more than one in five were open to digital banking. But more than two in three people are open to it [now],” says Lam.

“So, there has been a big shift in the past year. The adoption of digital banking by the masses is no longer something that we have to wait for five, seven years. The timing is now for us to bring digital into the mainstream for everybody,” adds Lam.

The new UOB TMRW app is a “vision of the future”, says Lam. “That vision brings together the innovation of TMRW with the richness and the completeness of UOB Mighty.”

The new platform is the “second generation of a well-loved app”, adds Lam. “In terms of UI and UX, UOB TMRW looks a little familiar, similar to UOB Mighty. But if you lift the hood, it’s running on TMRW’s microservices engine,” he says, referring to a way of building and maintaining a more agile software system consisting of many linked applications, instead of using one monolithic block.

What does this mean for users? According to Lam, banking on UOB TMRW will be faster and more stable. “We’ve focused on upgrading the capacity to run 2.5 times the peak capacity we had in the past.”

With the help of AI-powered tools, UOB wants to shape itself into an “adaptive bank”. Lam sees two components to this: a dynamic banking experience and what he calls a “growth graduation model”.

An interface that offers content relevant to a particular customer is what makes for a dynamic banking experience, Lam explains.

UOB TMRW offers different themes based on users’ transaction data, offering best-fit insights and services for different demographics across gender, age and affluence, among others. “That is the first pillar of our adaptive bank; what you see [on UOB TMRW] at any point in time is different from what another person sees,” says Lam.

The other pillar — a “growth graduation model” — offers a banking service that matures with the user. “The way we interacted with you last year should not be the same this year,” says Lam. “Even in a month, there may be substantial or significant changes in your financial situation, your job or your family’s future. If anything changes, we’re able to help our customers move from stage to stage based on their data,” he adds.

Drawing on these data, UOB can then help their customers form a better view and nudge them into action. “The vision for this model is to use artificial intelligence and machine learning to help our customers ‘graduate’ across their different life stages by providing them with ‘clickable’ insights and targeted solutions,” says Lam.

Going big on Indonesia with TMRW

Lam points to Indonesia, one of the few markets in the world that generates “very healthy net interest margins”. There, TMRW’s current and savings accounts (CASA) exceed 1% in net interest margin, says Lam, and this is within today’s low interest-rate cycle. “In a high or normal interest rate cycle in Indonesia, that net interest margin could be closer to even 3% or 4%.”

Lam speaks with more knowledge about Indonesia’s market than many of his colleagues. Before heading TMRW, Lam spent four years as country CEO of UOB Indonesia.

He highlights a balance in growing the quantity and quality of customers. “If you acquire many millions of customers but everybody gives you $5 or $10, the cost to serve these customers will eventually be too high,” says Lam.

TMRW’s average deposit per customer in Indonesia is “more than $500”, says Lam. The digital bank is working to bring that figure to $2,000 within the next couple of years.

Those figures add up to tremendous amounts. “When we do that, we’re looking at $2 billion in deposits for that particular franchise. And with very healthy net interest margins of, let’s say, 2%, we’re making $40 million.”

UOB can then use that deposit base as the platform to fund more growth. “When the retail franchise can gather that amount in account deposits, you can also fund the wholesale, commercial and corporate loans, which have much higher margins in Indonesia.”

Inspiring banking of tomorrow

Of course, as UOB moves to speed up its digitalisation process, it remains on the lookout for role models to learn from.

Lam cites Amazon as an inspiration, where users are kept logged into their accounts. To encourage customers to engage more, convenience is a priority.

As QR codes appear anywhere from department stores to hawker stalls, UOB TMRW brings the “scan to pay” feature to its pre-login homepage. “In the next iteration, we’re trying to bring more things to pre-login. Only when you need to do a secure transaction do you log in to your account,” he says.

As banking goes increasingly digital, Lam looks back at how the industry has evolved in the nearly three decades he has spent in the sector, with half of that in UOB.

“In the old days or the 1990s, customers had to go to a branch to meet bankers. But when the Asian Financial Crisis happened, bankers said ‘I cannot sit in a branch; I must go out and meet my customers’,” says Lam.

“This is kind of like that. Previously, digital banks were behind a firewall or a login. But now, the bank needs to find a way to be embedded in their partners’ ecosystems, where they can show insights and information,” he adds.

Banks should meet their users where they are most needed. “When the customer wants to do something, they are brought right to the bank,” says Lam. “Why make banking difficult for you?”

UOB is a Platinum Sponsor of Singapore Fintech Festival 2021. Click here for more information.

Photo: UOB