UNITED Overseas Bank (UOB) will stake its claim in the digital banking space in Asean, by being the first foreign bank in Thailand to launch a mobile-only bank that is aimed at millennials.
The mobile-only bank strategy, first announced by UOB in August, comes not just as younger customers are demanding more personalised services from their banks but also as fintechs such as Monzo and Revolut have emerged as challenger banks to raise the bar for the incumbents.
UOB's mobile-only bank known as TMRW will be built from scratch and will mine transactional data to bring personalised functions and information to meet each customer's needs, the bank said on Thursday.
As a simple example, TMRW can inform a customer when his or her monthly Netflix subscription has increased and present its impact on total expenditure. With proper transactional data, the bank can then nudge the customers to save up.
Banks here already offer some simple breakdown of customer spending - typically tracked through credit card spending - that consumers can review via their existing mobile or online banking services.
But one problem is that transaction data may lack details so a cup of coffee purchased at a cafe may not be tracked as an F&B expense because the piece of transaction data may be reflected as a nondescript payment to a nondescript business. So both customers and banks are unable to see a clear expense pattern.
To address this, UOB has partnered fintech firms such as Personetics and Meniga to experiment and learn in real time how to drive up customer engagement - a key metric for digital banking success as digital banking customers tend to transact more often with their banks in exchange for quick and customised service.
Given the lower servicing costs as no investment in additional physical branches is necessary, the mobile-only bank can offer a new stream of data-driven returns.
TMRW will be operated at a cost-to-income ratio of 35 per cent once it hits a steady state in three to five years - the time that consultancies have predicted would take for mobile-only banks to break even.
TMRW will use chatbots to engage their customers and use gamification to encourage consumers to save more. It can also prompt customers on upcoming payments and make it easy for customers to search through their transactions to track their spending. At a start, TMRW will offer a transaction account, a savings account and a credit card.
It does not aim to compete on rates to avoid the race to the bottom on pure pricing, said Dennis Khoo, UOB's head of group retail digital, at a media launch. TMRW also aims to strip away banking jargon and remove any hidden fees - pet peeves flagged by young banking customers.
Mr Khoo said banks hold volumes of Big Data that can help to personalise offerings to customers. "Currently, we are just archiving it (the data). Now, we're putting it to hard work."
Mr Khoo said the digital banking strategy is a headstart as banks compete in a more uncertain future in the world of retail banking, warning that banks that do not engage on this front are risking their future ahead.
"I think it would be hard to catch up, once we've had two to five years of experience," he added.
UOB said it will launch TMRW in its next Asean markets in the coming months. All in, TMRW aims to attract three to five million customers in the next five years.
The strategy comes as Asean's digital generation forms the third-largest base of digitally savvy consumers after China and India. And while TMRW is aimed at millennials, the bank will open up the product to all demographic segments. Millennials can also visit UOB bank branches for service, even though they are on the mobile-only banking account.
Rival DBS Bank has acquired about 2.3 million digibank customers since the launch of digibank India in 2016, said Sandeep Lal, head of digital bank at DBS. It also launched digibank in Indonesia in 2017, and now has close to 400,000 digibank customers there.