Wednesday, 24 July 2024

UOB Singapore’s retail business yields strong performance as it expands digital customer engagement

5 min read

By Janine Marie Crisanto

United Overseas Bank (UOB) increased retail banking income contribution by 15% as the financial industry grapples with digital advancement. The bank leveraged its omni-channel customer engagement model which helped grow retail deposits by 7% year on year. The bank continued to invest in digital transformation and innovation which resulted in 96% of all transactions being conducted digitally in 2019.

  • UOB bolstered its 20% market share in retail deposits and loan products despite stiff competition
  • The bank exhibited the best cost management among its peers in growing its franchise
  • Its products received high net promoter scores in the BankQuality survey and rankings

This year’s assessment of the Best Retail Bank in Asia Pacific was disrupted and delayed by the COVID-19 pandemic. To ensure the rigor and comprehensiveness of the evaluation, the assessment was expanded to consider banks’ response to the pandemic. In addition, it also incorporated customer derived net promoter score-based ratings from the BankQuality consumer survey on retail banks, including how they helped customers during the COVID-19.

The Singapore banking industry has been dominated by the three main domestic banking groups – DBS Group, Oversea-Chinese Banking Corporation (OCBC), and United Overseas Bank (UOB), accounting for the majority of customer pool and up to 70% share of consumer loans and deposits. They face fierce competition from 11 qualified full banks that vie for a slice of the lucrative retail finance and wealth management market, albeit with restrictions on the number of locations that they can operate from.

In this year’s assessment of Best Retail Bank in Singapore based on the evaluation scorecard, UOB emerged as the top retail bank for its sustaining its key market position and strong performance in digital journey and customer experience.

Brand and Sales: UOB bolstered its 20% market share in retail deposits and loan products despite stiff competition

The largest bank in the country, DBS Bank through its high-street POSB franchise, has a dominant share of the domestic retail deposit market with an estimated market share of over 35% and leading position in wealth management after its acquisition of ANZ. It however continues to see its deposit market share eroded by its peers. UOB has the second largest domestic retail loan and deposit base after DBS. It has been able to grow and win market share in domestic deposit and retail loans, estimated at over 20% as it focuses on more targeted product and marketing programmes. The bank maintains its strong position in the highly competitive market claiming to bank more than 40% of Singaporeans.

All banks have been experiencing a slowdown in home loans due to property cooling measures implemented in 2018. Although the three banks still account for double digit market shares in mortgages – DBS with 30%, UOB with 24% and OCBC with 20%, only UOB did not see a contraction in home loans based on reported group data. UOB mortgages remained flat while the other two banks saw a decline of around -4% to -2% year on year.

Financials: UOB exhibited the best cost management among its peers in growing its franchise

Although in terms of financial performance, OCBC has a slight edge with a higher retail revenue growth in 2019 as well as a compound annual growth rate from 2016 to 2019, UOB was able to increase its retail banking contribution to total bank’s income by 15%. The bank was able to decrease its cost-to-income ratio below 40% for its retail business, while other banks continue to grapple with the relative high cost of running their retail business with cost-to-income ratios of above 45%.

Digital Journey: UOB provides retail products across a range of touchpoints and ecosystems

Since 2014, the traditional brick-and-mortar banks have been transforming their core business processes and actively migrating customers to their alternative channels. UOB was the first bank to allow customers to have cardless access to ATM and CDM machines back in 2011. Last year, OCBC added a QR code option for customers to perform their ATM transactions. DBS is the only bank that still does not offer a cardless ATM access option and a number of its product application process remain manual.

Among Asia Pacific markets, Singapore has one of the highest digitally active consumer base with each of the three domestic players claiming to have over 50% of customers who are regular users of digital channels. Specifically, UOB recognises the need to engage customers across a range of touchpoints and ecosystems that are built around customer needs. Today, all its retail product application processes can be performed online. It has expanded its existing property ecosystem for homebuyers to cover more than 90% of property agents in the country to enhance the home buying journey. In 2019, more than 25% of mortgage applications were conducted online and more than 50% were processed instantly.

Customer Experience: Its products received high net promoter scores in the BankQuality survey and rankings

Despite their market dominance, the three domestic banks did not perform well in the net promoter based BankQuality survey and ranking that was introduced this year to incorporate the voice of customers into the award evaluation.  The ranking was dominated by foreign banks, Citibank led with a score of 101.4 followed by Standard Chartered with 101 in the net promoter based BankQuality score. DBS was third with 99.78 and UOB was fourth with 99.42. UOB however was the only domestic bank that did well in the channel and product level NPS.

Among the three big banks, UOB earned a positive NPS score of 6% for asset management, while DBS and OCBC received -17% and -18% respectively in the BankQuality survey. UOB also received the only positive net promoter score (NPS) rating for its home loan products with an NPS of 23%, while DBS scored -24% and OCBC scored -23%. For credit card products, UOB received the highest consumer rating among the three big banks with an NPS of 23%. DBS came in second with a 10% NPS, while OCBC received 6%.

COVID-19 Response: Its staff raised over $1.21 million in relief fund and the bank disbursed more than $2.93 billion in government backed loans to SMEs

DBS set up a $7.35 million (SGD10.5 million) “DBS Stronger Together Fund” to assist communities across Asia. OCBC has provided an estimated $1.13 million support measures for communities by raising internal donations as well as helping charity partners. The bank also provided around $740 million (SGD 1 billion) in government-assisted loans to SMEs by June 30. Meanwhile, Standard Chartered Bank has established a $50 million COVID-19 Global Charitable Fund.

In August, UOB announced that it has raised over $1.21 million (SGD1.65 million) in a month from staff and customers for the “UOB Heartbeat COVID-19 Relief Fund” from a global network of 18 markets. The initiative aims to help frontline healthcare workers and vulnerable communities around the world. Since April, UOB has also provided over $2.93 billion (SGD4 billion) in loans through government-assisted funding schemes to its mid-sized enterprise clients in addressing immediate liquidity challenges. Meanwhile, Citibank announced three relief efforts in supporting the community during this time, namely: pledging $150,000 to The Straits Times School Pocket Money Fund and The Business Times Budding Artists Fund; donating $150,000 (SGD210,000) to YMCA Food Programme; and a month-long fund-raising campaign for the non-profit Humanitarian Organisation for Migration Economics (Home). At a global level, Citi's relief efforts have exceeded $65 million.

For the full list and details of Excellence Awards winners 2020 click here

For details of the Excellence Awards programme 2020 click here 

For details of the BankQuality Consumer Survey and Rankings click here


Keywords: Digitalisation, Digital Bank, Mortgage, Covid-19
Institution: UOB, DBS, OCBC, BNP Paribas, ANZ, MAS, Citibank, Standard Chartered, Visa
Country: Singapore
Region: Southeast Asia
People: Jacquelyn Tan
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