UOB powers growth with data

UOB has taken big steps this year to ramp up its investments in data analytics, and plans to build a digital bank that will better capture the mobile-first demands of the next generation of customers.

Dennis Khoo, head of digital bank and digital banking at UOB, said this comes as the rise of fintech firms - or techfins - is blurring industry lines and redefining the way the bank engages with customers.

"Technology advances and innovation will continue to change the banking landscape. In Asean, as the new digital generation comes of age, there will also be more customers who are 'mobile-first' or 'mobile-savvy', who expect a banking experience that is digital first."

In August, UOB said it would start an "engagement-focused, mobile-only" digital bank in its key Asean markets.

The bank said it would leverage its partnership with Personetics - an investment just announced a month earlier in July - that would boost the bank's AI-based solutions by drawing deeper insights from huge volumes of transaction data to help identify individual transaction patterns.

UOB has a minority stake in Israeli fintech firm Personetics, and joined other global banks and investors such as Spanish lender Banco Santander in investing in the fintech company.

Personetics' AI offering is meant to help identify individual transaction demands, enabling UOB to provide customers with real-time and personalised guidance on their financial decisions.

The bank said this service includes anticipating and prompting customers when their balances may be insufficient to cover upcoming payments, detecting unusual or suspicious account activity in their accounts, and nudging them to save more or to spend wisely.

"These insights will be used to provide customers with real-time, personalised and insightful guidance to help them improve the way they save and spend and to help them make better financial decisions," said Dr Khoo.

With that partnership in place, UOB will look to design a digital bank that would create "simple, transparent and engaging experiences" for its customers.

"The availability of rich transaction data enables us to do so. Through our partnership with Personetics, we will be able to use their cognitive banking capabilities to help identify patterns and to extract insights from the data."

Dr Khoo added that Personetics' machine-learning capabilities also enable the bank to refine the way its converses through UOB's Digital Bank, such that it is personalised based on behavioural segmentation.

On the credit assessment front, the bank is also deploying AI and data analytics to raise their efficiency accuracy when assessing the credit quality of potential customers.

UOB's investment in Personetics came after the set-up of a joint venture, Avatec.ai, in April this year. Avatec's credit assessment tool also uses AI to determine an applicant's credit quality in seconds.

UOB set up Avatec with Beijing-based Pintec Technology Holdings. The bank holds a 60 per cent share of Avatec, while Pintec holds the remaining 40 per cent. UOB plans to invest up to S$12 million in Avatec over the next two years.

Partnership

Pintec, which collects a fee for each use of its credit assessment model, uses non-traditional data points such as utility bills, call history and spending patterns to determine whether potential borrowers are able to pay up. It also taps into retail networks to offer loans at the point of sale.

Avatec's credit assessment tool is expected to be deployed across Asean over the next two years.

"Our joint venture Avatec's AI-driven credit assessment capabilities enable us to serve a broader base of South-east Asian customers, such as customers who may be new to credit as well as those who are underserved," said Dr Khoo.

Meanwhile, the bank has used AI to boost its regional analytics-driven credit underwriting engine. In March, it said that since the implementation of the enhanced credit underwriting engine, the bank has registered a 50 per cent fall in the default rate of its small business loans.

It has also cut the turnaround time and number of steps involved in a loan application by more than half.

The enhanced credit engine, which was developed in-house, was first rolled out in Thailand in 2015. The analytics-enabled engine has since been rolled out in Singapore, Indonesia, Malaysia and Vietnam.

UOB said it combines the existing sources of information from the bank with new pools of data, such as those relating to the company's day-to-day operations.

The bank looks at the performance of the industry as a whole, and whether the borrower has succession plans in place. For some segments, such as e-commerce merchants, this would include their customer ratings. The engine also analyses information from government databases.

Dr Khoo said: "We believe that the way in which banks use these new technologies to leverage the data they hold is the key to providing customers with simpler, smarter and engaging banking experiences."