CIMB's Gupta: "Getting the culture right is a big step in regionalising your business"

• Digital, customer experience and analytics combined create competitive position
• Increasingly able to align its regional operations in regards to corporate and performance culture
• CIMB will launch a digital-only bank in Vietnam, which will serve as a test-bed for regional expansion

In the last five years, CIMB Bank Malaysia (CIMB) has persistently been pursuing a strategy to mould its regional operations into a cohesive body, a uniform corporate culture with common service standards, while equally accounting for country variances that allows enough entrepreneurial clout for local leadership to shine. Group retail financial services at CIMB scored a few milestones recently that puts them into the top league of best retail banks in the region according to the Excellence in Retail Financial Services ranking of The Asian Banker Research. The evolution it took from an investment bank, into a universal commercial bank in Malaysia and increasingly transforming into a regional bank is a remarkable feet among its local and regional peers. The bank is well-known for its disciplined cost and risk management culture.

For the first time in history, profit before tax from group retail banking contributed more to CIMB than corporate banking in 2016. Equally, retail banking revenue generated from its ASEAN operations including, among else, Indonesia, Thailand and Singapore contributes now 27% to group retail revenue. The bank has a Target 2018 (T18) initiative that it launched in early 2015, which aims to complete the bank’s ASEAN footprint by 2018.

Currently, CIMB operates 900 branches across six markets. Its key retail banking markets are Malaysia, Singapore, Indonesia and Thailand. The bank has a combined retail loan size of $38 billion (MYR60.9 billion) by the end of 2016. Malaysia contributes 75% to this portfolio.

“While the bank started out by building its digital infrastructure since 2010 and focused on offloading branch transactions to digital channels, increase in digital sales, customer experience (CX) and big data coupled with analytics, are opening up opportunities for new sources of growth,” according to Samir Gupta, CEO, group consumer banking at CIMB.

Key building blocks in expansion

“We have been closely examining the customer journey and the bank’s focus is on improving CX and reengineering the customer journeys, which will reduce pain points that customers experience, allowing the bank to better serve customers,” said Gupta.

“Digital was one, CX was the other, and the third one is analytics. We started analytics five years ago, adding more value to customers, and became more efficient in cross-selling. We have implemented our big data platform three months ago, and now we are seeing significant improvements in the customer experience – response rates and behaviour patterns, which were earlier not so apparent. We are able to now to focus on customers’ context, and adding value to the customer by interacting with them real-time,” he said.

In fact, Gupta is now the driving force in CIMB consumer banking to create a regional powerhouse in ASEAN, having a track record of building consumer banking franchises in Asia, Africa and Middle East first for Citibank and Barclays and from 2010 until 2016 as director consumer banking at Bank CIMB Niaga in Indonesia. There, Gupta built the consumer banking franchise focusing on service quality, segmentation and scale. He rebalanced the consumer loan portfolio by weaning of CIMBs dependency on high risk automobile loans and increasing the portion of credit cards and personal loans.

“The other big initiatives we are focusing on include partnerships, group synergies, and micro-segmentation. We have partnerships with a whole range of companies in the consumer durable and non-durable space. Consumer banking is a scaled business and we've built scale by partnering with Petronas, Tesco, AirAsia, Axiata in the various markets around ASEAN. We are also adding digital partners such as Lazada, an e-commerce company with strong growth in customer base. The other piece, which has been a success factor, is synergies within the bank. Being a large universal bank, we are making a collective offering and are leveraging our relationships with corporate and commercial clients to serve their employees and their customers. A fair amount of work is also happening on segments. What we have done so far is segmenting by transaction value, income or assets under management (AUM),” he said.

“Based on customer lifestyles, ranging from students, first-time employees, young families, mid-career employees, senior executives, housewives, retirees, self-employed and professionals, we will be offering bundled product offerings relevant to the various segments with the help of analytics and digital delivery capability. The future is going to be digital, but it has to be powered by big data and partnerships, which allows us to provide bundled, tailored solutions real-time," he added.

Acquiring business digitally

To gear up, the bank is actively converging the core platforms that run internet and mobile banking to release next generation banking functionality faster into both platforms. CIMB’s “1Platform” replaced five core banking applications with an integrated streamlined solution to easily view investments and borrowings. The service became active in Malaysia, Indonesia, Singapore, and Thailand in 2016. For CIMB, digital now is IT. To simplify internal processes and organisation, the bank successfully delivered key initiatives across Malaysia, Indonesia, Singapore and Thailand as part of the digital sales enablement programme that is in line with the T18 digital banking strategy. Key capabilities introduced were, among else, instant credit decision-making and disbursement, digital onboarding, online signature, and digital document uploads.

The bank is also at the final stage of introducing digital know your customer (KYC) and facial recognition for easier customer on-boarding in just three steps via mobile banking which involve real-time ID document authentication, watch list screening, geo-location tagging and a ‘selfie’ that facilitates verification.

CIMB continued to make it easy for customers to start banking relationships through digital channels, and are also acquiring more business (e.g., loans, credit cards) digitally.

The branch digital account opening platform known as “1View” on-the-go (OTG) was launched in 2016 to enable paperless current and savings accounts opening for new-to-bank customers in just over five minutes. Currently, 80% of current account, savings account (CASA) openings for retail customers are originating from OTG in branches, resulting in substantial costs savings and better CX.

“The other big part involves productivity. We have been working out one piece at a time to offload customer transactions through internet and mobile banking. As a result, revenue per branch has increased at an annual clip of close to 8% since 2014, and we expect this to further improve in 2017. At the same time, staff numbers and operating expenditure per branch have decreased. Across the region, we closed 89 branches in 2016 and the network will further shrink, with the shape and format also changing. For instance, in Indonesia, we launched digital lounges in high traffic locations, such as shopping malls. We will also launch our first digital-only bank in Vietnam by the end of 2017," Gupta said.

In Malaysia, CIMB currently acquired 48% of its new to card customers and 83% of all personal loans through digital channels. CIMB has expanded its acquisition channel to inbound, website and ATM with 40% of all personal loans fully via straight-through processing. CIMBs Group consumer banking cost to income level has decreased by 7% to 69% between 2014 and 2016, despite heavy investments in its digital agenda.

“Early 2017, CIMB launched its artificial intelligence (AI)-powered conversational mobile banking app called CIMB enhanced virtual assistant (EVA). We will be upgrading it in the third quarter of 2017 with natural language processing,” Gupta said. The app is a two-way messaging application between customers and the bank and used to address needs such as checking account balances, paying bills, performing mobile reloads and receiving the latest offers by the bank.

“EVA, I think will become a more widespread channel than ‘Clicks’ in the future, our internet banking arm. The future of retail financial services will become increasingly text and chat-powered by AI,” Gupta believes.

Competition versus cooperation

While CX, digital, big data and analytics explain the infrastructure part of CIMBs success in consumer banking there are other drivers that have to come into play to move the bank forward on a regional level.

“Consumer banking is basically a culture business. To have the same culture across 900 branches, you have to breathe it day in and day out, 365 days-a-year. Corporate culture, one of the components of CIMB’s T18 strategy to strengthen our foundations and grow our business, is also becoming second nature. If you get the culture right in regionalising, you can take a big step forward with your business, but it takes time and commitment to embed it in the organisation,” Gupta highlighted.

CIMB aims to bring in the best local talent but also make sure certain alignment of goals, strategy, and culture is in place, an approach which encourages entrepreneurship in overseas country operations.

“At the same time, in any large organisation, you have people focusing on their respective areas. So, we made sure that the messaging was right and, that the executives in leadership roles talked the same language and also made sure key performance indicators (KPIs) were aligned. For example, wherever there is conflict, let’s say with regards to KPI, we focused on how you can have a win-win situation, rather than have a completely scientific way to evaluate performance. For us, it was all about getting people to realise not to worry so much about their own KPIs, but to act in the interest of the company’s greater good,” he said.

Regional expansion and performance outlook

The group’s consumer banking profit before tax, which includes its overseas retail operation , increased by 35% year-on-year (YoY) in 2016, while retail loan growth came in at 9% YoY. The bulk of digital and big data infrastructure investment has been completed and the cost element is expected to decrease further in CIMB group consumer banking. In addition, lower impairment losses in Malaysia and Thailand and improved results in its Indonesian and Thai retail operations will add to an increase in profit margin.

“In Malaysia, market share has gone up across most business lines. We are streamlining the auto loan portfolio in Indonesia as part of our strategy to get better control there. Thailand reported profit in retail banking, and this year, we are seeing continued strong growth."

Better retail performance was partially driven by an improved or stabilising economic environment and lower retail impairments, in particular in Indonesia and Thailand, but increasingly Gupta hopes that the impact on the work in CX, digital and analytics and will carry this momentum.

In Vietnam, CIMB has received in December 2016 a licence by the local regulator to set up a 100%-owned banking subsidiary. The bank is making a big bet by launching its first digital-only bank in late 2017.

“In Vietnam, we are just getting started with a radically new digital-only business model,” Gupta added. “We have a full banking licence in Vietnam, and we already have an operational branch in Hanoi. Once we have tested our new digital challenger model in Vietnam, we will replicate it in the Philippines next year. We will also be implementing a series of digital initiatives across the region, which will be built on our existing platform,” he said

Challenges ahead

For the first quarter of 2017, group consumer banking revenue was up almost 11% year-on-year. The bank revenue growth budget for 2017 is 8.7%. The Asian Banker Research expects however that profit before tax may weaken and will only reach single digits, given that first quarter grew only by 0.5% YoY, mainly driven by a weakening business in Indonesia.

Making overseas retail operations crisis-proof against economic cycles, as well as creating a bigger digital deposit generation platform, will be instrumental in creating a sustainable and profitable regional income base. In Malaysia, CIMB has yet to gain a leading market position in any of the consumer lending businesses. The bank, which looked mainly at the emerging affluent and affluent markets and has a very corporate focus may reengage, through digital and analytics, with markets it didn’t consider before such as small and medium enterprise banking and mass market segments. With the work having been done in the last two years and Samir Gupta now heading the regional consumer banking portfolio, it may well be having the firing power to maintain its momentum.