Forging your own challenger bank: TMRW by UOB 01 July 2021

Jimmy Koh, Managing Director and Chief Commercialization Officer at TMRW, discusses how the bank’s core goals of simplicity, engagement, and transparency are resulting in one of the best customer experiences in the region. 
Why did your UOB decide to launch a digital bank and how did it proceed?

The launch of the iPhone in 2007 and the subsequent proliferation of smart devices have revolutionized different industries, including banking. As consumers, especially those in large emerging markets, take to the convenience of accessing banking services at their fingertips, we anticipated that this would serve as a catalyst for digital banking growth. TMRW was launched to stay ahead of the competition and to preempt the rapid growth of new digital banks globally.

UOB launched TMRW (pronounced “tomorrow”) as ASEAN’s first mobile only digital bank in Thailand, focusing on the emerging affluent, who are largely the region’s Young Professionals (YP) and Young Professional Families (YPF) – millennials aged 25-39 who are entrepreneurial and digitally savvy. Our goal was to address the unmet needs of digitally-savvy customers and to provide a banking experience that they prefer. To guide us, we embarked on a comprehensive ethnographic research before building TMRW, which found that the region’s millennials value simplicity, transparency, and relevance from their bank.

UOB has a two-pronged approach to continue to serve our customer base where we are established, while growing our customer franchise in the region through TMRW – via an expand-defend strategy. TMRW is our challenger digital bank to grow our customer franchise in ASEAN. The number of digital-first or digital-only consumers in ASEAN is massive and growing. TMRW acts as a launch pad to acquire more customers digitally to scale regionally and to grow our market share while keeping costs low. A digital bank also enables us to reach a wider group of customers, including in areas where we do not have a UOB branch. For these customers, access to TMRW is as simple and convenient as reaching for their mobile phones any time and anywhere. 

There is vast untapped retail banking opportunity in these populous, underserved markets in Southeast Asia. According to the Boston Consulting Group (BCG), the customer lifetime value of ASEAN’s millennials, many of whom are the next generation of emerging affluent professionals, presents a market opportunity of S$10 billion. As ASEAN’s first digital bank, TMRW benefits from first-mover advantage to test and learn how to stay relevant to our customers as we grow with them. 

To be able to bring TMRW to two very different and large markets in ASEAN, namely Thailand and Indonesia in such a short period of time is no mean feat. However, TMRW also benefited from UOB’s standardised regional IT infrastructure, which enabled us to accelerate the build of TMRW and to launch our full-fledged digital bank in Thailand in 14 months. Eleven months later, we brought TMRW to Indonesia, customised to meet Indonesia’s cultural, linguistic and regulatory requirements. 

At the UOB Group level, TMRW also serves as a useful experimental lab where best practices in innovation are replicated across our different business units to serve our customers better. For example, the data-driven digital engagement engine in TMRW which enables us to personalize the banking experience for every TMRW customer is also being used to serve UOB retail customers in Singapore and Malaysia. 

How is this digital bank positioned? What are its main competitive advantages? Is it targeting a different type of customer? 

We took time to deepen our understanding of what the next generation of ASEAN’s emerging affluent customers – that is, today’s millennials – needed as well as the geographical, cultural, and regulatory nuances of each market. This included interviewing more than 500 young professionals in Thailand to understand their pain points, habits, and expectations when it comes to their banking experience. 

Given that the region’s millennials want simplicity, transparency, and relevance from their bank, every feature in TMRW, from the app interface to the solutions we offer, is guided by our promise to ensure a simple, engaging, and transparent customer experience. 

TMRW aims to be the world’s most engaging bank for millennials. Our brand promise is to be simple, engaging, and transparent, and to help our customers save and spend better. As our TMRW customers advance through different life stages and have more complex financial needs such as investment advisory, we will also be able to continue to serve them through UOB’s universal suite of financial solutions. 

At the same time, we focus on the promotion of financial literacy among our customers while making the experience enjoyable. For example, one of TMRW’s most popular features is the City of TMRW, a game where customers can build up their city as they grow their savings. This gamification of savings enables us to encourage good saving habits in a way that our customers prefer. According to our research, millennials respond better to prompts that are fun and do not make them feel guilty. TMRW’s personalized campaign in Indonesia, the WIN (Waktu Indonesia Nabung) Campaign was also designed to promote financial education and positioned to encourage customers to curb unnecessary spending by enabling them to unlock exciting rewards like e-vouchers every time they top up their monthly savings.

We also created a new business model for TMRW, one that is anchored on digital engagement as a means to scale. TMRW’s ATGIE (Acquire, Transact, Generate data, Insights, Engage) business model, in which  quality customer engagement and not customer acquisition is our key performance indicator sets us apart from the typical banking business model. We believe that our relentless focus on customer engagement is a sustainable way to keep our cost of acquisition low, which enables us to invest in innovation that can enhance the customer experience. 

To enhance engagement, our app is designed based on a feed concept similar to Facebook and Instagram. The feed is populated primarily with a set of personalized messages and insights in the form of a “Card”. The more our customers transact, the more data is generated and the more Insights Cards that can be fired. These insights help to guide our customers and to enable them to make more informed financial decisions. 

TMRW customers in Thailand are also one of the first in ASEAN to be able to track their expenses in real time. In addition to providing them a real-time overview of their finances, our customers can also set a budget on the app and be alerted in real-time when they are reaching their limit for the month. 

How dependent/independent is this digital bank from the incumbent bank in terms of technology, management, finance, marketing and distribution? 

TMRW and UOB share resources which help to ensure operational cost efficiencies and to drive innovation at scale. For example, TMRW leverages UOB’s established IT systems, partnership ecosystems, and local knowledge in ASEAN. Our digital bank is launched under UOB’s banking license in the two markets of Indonesia and Thailand. TMRW is also built on UOB’s regional IT systems, which has enabled the digital bank to scale quickly across two ASEAN markets, each with its own nuanced sets of regulatory, cultural, and linguistic requirements. 
As part of TMRW’s agile set-up, UOB colleagues in support functions such as technology and compliance also work alongside the TMRW team to bring the digital bank to life. UOB is also unique in that we have invested in a robust and secure data infrastructure, governed by the Bank’s Data Management Office. This data framework enables us, among other things, to push the boundaries in developing, testing, and refining new data-driven digital solutions and services for our customers in a secure sandbox environment. TMRW also serves as an innovation lab for UOB, where new digital banking innovations that have been validated can be adopted by other units in the bank. 

How successful is this digital bank so far? What are its main successes? Its main challenges? How do you see this digital bank evolving in the next five to ten years? 

 While we are still in our early years of operations, our goal to grow our regional customer franchise through TMRW can already be seen. By March 2021, we had acquired more than 310,000 customers from launch and cost per customer acquisition (CPA) had decreased by more than 40 per cent since December 2020. Of these new customers, about 70 per cent are new to UOB Group. TMRW customers account for 15 per cent and 20 per cent of UOB’s retail customer base in Thailand and Indonesia, respectively.

More importantly, we are meeting our primary key performance indicator of growing a base of engaged and satisfied TMRW customers. TMRW’s net promoter scores have been above 50 in Indonesia and above 40 in Thailand, placing our challenger digital bank ahead of larger and more established local peers.   
In Thailand, TMRW’s base of engaged customers have seen them lend their trust to our digital bank. At around 25 per cent of our customers who are highly active (at least 4 financial transactions a month) have also recommended TMRW to their family and friends. 

Since our launch, TMRW has been highly recognized by the industry for its unique digital bank proposition. We have received 33 awards and accolades to date, including The Digital Banker’s "Best Digital Bank in ASEAN" and “Best Digital Bank for Customer Experience”, Finovate’s Best Financial Mobile App and Banking Tech’s "Best UX/CX in Finance Initiative". We are encouraged by the industry’s recognition of our constant efforts to push the boundaries when it comes to digital banking in ASEAN. 
As we move into phase two for TMRW, we are on the road to scale and commercialization. We recognize that there are challenges ahead, compounded by the ongoing COVID-19 pandemic, as well as opportunities. TMRW’s next phase of growth focuses on three key pillars: 1) building an ecosystem of strategic partnerships to achieve scale; 2) leveraging shared capabilities for the wider benefit of the UOB franchise, and 3) enhancing the customer value proposition (CVP) with additional products and capabilities to improve the customer experience and to drive higher revenue.
TMRW will continue to build an ecosystem of partnerships with brand owners, retailers, e-commerce players, telecommunications companies, and travel service providers for meaningful data that help us understand our customers better and bring more value to them.
In terms of a lean business model, we have partnered with fintechs to significantly lower TMRW’s cost to innovate. Our digital capabilities to serve customers such as our intelligent chatbot have also allowed us to lower the cost to serve as we scale. These capabilities are also shared with the wider UOB group to drive cost efficiencies across our network. 
As part of our approach to scale TMRW in a considered manner, we are focused on building both sides of the balance sheet, supplemented by fee income from alternative data-driven digital credit and insurance. To do so, TMRW will expand its digital product offerings beyond the products that we have today, such as insurance and fixed deposits, to address our customers’ financial needs as they advance through different life milestones.
More generally how do you see neobanks competing in the future banking landscape?

Trust is a key differentiator. This is where TMRW by UOB, leveraging the brand of an established bank with an 85-year history, has an advantage in the digital banking space compared to tech-led banks.

TMRW tracks more than 300 digital banks globally, which have given us insights to the key success factors of profitable digital banks: 
1 - The ability to address inefficiencies in large markets
2 - A focus on unsecured lending with alternative data
3 - Ecosystems that give unparalleled advantage in acquisition and usage
4 - A lean model for long-term sustainability. 

TMRW’s next phase of growth is a strategy based on these success factors. We focus on 3 key pillars: 1) Building an ecosystem of strategic partnerships to achieve scale, 2) leveraging shared capabilities for the wider benefit of the UOB franchise, and 3) enhancing the customer value proposition (CVP) with additional products and capabilities to improve customer experience and drive higher revenues.

The pandemic we’re in has had the unprecedented effect of driving up digital adoption, which in turn accelerated the entire process of banking evolution. With TMRW, we are technologically-enabled to better serve our digitally savvy target customers aged 25-39. By building a lifestyle ecosystem of products through strategic partnerships, we can create a long-term journey for our customers where we grow with them, bringing them more sophisticated solutions at different stages of their lives and using this data to better serve and interact with the next generation of consumers. We predict this expanded target group to make up almost 39 – 40 per cent of the ASEAN population in 10 years, and they will have evolving needs.

With digital disruption transforming traditional business models for financial institutions like ourselves, the biggest winners to come are the ones who can leverage technology, data, and their broader ecosystem as a force multiplier to deliver value. TMRW is at the forefront of this digital evolution, and as digital banking becomes the new norm in the foreseeable future, our brand and our services will be our strongest competitive edge.
Download the full paper "Challenging yourself: How traditional banks are forging their own challenger banks" and read more of these exclusive interviews.

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