Jens Lottner, Techcombank's CEO

Vietnamese commercial lender Techcombank, short for Việt Nam Technological and Commercial Joint-Stock Bank, has been positioning itself at the forefront of innovation in the country’s financial sector.

Innovation in banking is not about competition with the rise of fintech. It is more about giving customers the best experience they can get. Understanding that ultimate goal, Techcombank has been tirelessly transforming itself to deliver greater benefits to its customers.

While acknowledging the bank has established a strong track record as a financial services innovator in Việt Nam, Techcombank’s CEO, Jens Lottner, reckoned that there was still a lot for it to do to better understand customers.

Techcombank appointed Lottner as its new CEO in August, who came from Siam Commercial Bank, Thailand’s largest commercial lender.

Lottner shared his thoughts on the growth potential in Việt Nam as well as how Techcombank will invest in innovation going forward.    

You left Siam Commercial Bank (SCB), one of the most prestigious banks in the region which has a lot of achievements and successes in financial services. What made you choose Việ Nam and specifically Techcombank?

Before I joined Siam Commercial Bank as an executive I was a consultant. This career shift forced me to develop a lot of new skills and so I really enjoyed my time at SCB. But what I enjoy the most is constantly changing and building things, helping organisations transform, and shifting into higher gears. I led a lot of transformation efforts at SCB and then became the CFO in 2019 when a lot of the foundational elements had been put in place. Hence, when the offer came from Techcombank to go to Việt Nam and help one of the best institutions in the country to become even greater in its pursuit for customer excellence, this was an outstanding opportunity I couldn’t miss.

I actually first came to Việt Nam in 2009 to help establish McKinsey’s practice in the country. At that point in time, Techcombank was the first McKinsey client in Việt Nam. The country then, as today, was full of optimism and dynamism. There is a lot to be done and a lot of opportunities so that each day becomes better than the day before. In countries such as Malaysia or Thailand, sometimes people might have the feeling that they've already seen the best of times, which is very different from Việt Nam. That always triggered my interest to come to Việt Nam.

With both advisory and financial background, how will you leverage your experience to help with Techcombank’s operations, especially the bank’s DNA of being customer-centric?

It is important to ask more and more questions until you really understand a problem. Only then are you able to develop the right solution. So I would just continue to ask questions which, I hope, our management team will also ask to understand what customers really want, and not just pretend that we know the customers.

There are techniques to get to a much deeper customer understanding than just having an individual fill out a survey. If you do ethnographic research, you will actually accompany a customer for a day, observe what he/she is doing, what kind of financial transactions they are doing, and how complicated life can be for a customer to do his daily banking. I think we need to get to that level of customer understanding. So I hope that I can encourage everyone to be more questioning on how we are truly helping our customers and not think they know everything.

If you ask me about cost, I think we should only have costs which are helping to create customers value. Ultimately, every bank employee should interface with the customers and not spend time with internal bureaucracy between departments. In order to do that, we need to invest in technology to streamline our processes. At the same time, customers will still want to have a human interface, so we need to enable our staff to deliver a better experience to our customers.

I'm not concerned that we will not have enough jobs for our employees going forward, but they have to be done in a value-creating manner and that's where we should invest in. That's also where the returns will be coming.

Where is Việt Nam now compared to other markets in the region?

Financial services are still very fragmented. There are still a lot of smaller banks in Việt Nam compared to some of the other markets right now where the big banks have a much higher share. If you take the top six banks, I believe in Thailand they would constitute above 70 per cent. In Việt Nam, it's probably below 50 per cent. What that means is that it is harder to make the required investments to modernise your business and operating models, as you can’t spread your fixed investments across more companies or customers. So going forward I expect more differentiation to happen between the leading banks and the rest of the industry, similar to what we have seen in other markets and other industries, like retail for example. And I would expect this trend towards a more consolidated banking industry structure to accelerate as the investments required for staying ahead will increase over time.

What is the pace of tech innovation within Techcombank and what kind of disruptive solutions can the bank adopt?

Techcombank has always been at the forefront of innovation. The number of customers who are coming in through our digital channels is pretty high compared to a lot of other banks and we are constantly trying to improve it.

Technology can turn everything upside down. For example, people often say wealth management is only for the rich. However, technology today allows you to offer wealth management solutions at a fraction of the cost in the past, thereby “democratising” more complex financial products. Or let’s take credit. Usually, you required tremendous amounts of financial data to decide if you want to give a credit to a customer. In a lot of cases, this information was not available, incomplete or sometimes not reliable, in which case a bank would not lend. Or it took a lot of effort to collect data, leading to high costs for customers. 

Today, you can use so many types of data to increase your ability to provide credit to people who don't have such a financial track record. That will allow you to finance smaller SMEs at a level which has not been seen before. That is very disruptive, but I think there are only very few banks in the world who have fully harnessed the power of these new technologies.

What kind of initiatives will you kick-off to help Techcombank get there?

The core enabler for that is data. Data allow us to understand our customers much better than we were ever able to in the past. We are trying to be the best institution in Việt Nam when it comes to using technology and data to understand customers. Once we are able to do that, it's just a question of training people to use that information to continuously create better solutions for our customers.

The amount of data we can use is huge. Of course, we know the financial transactions, but for example, by analysing the usage of our mobile app we can understand what products they are interested in, at what time they are looking for information, what items they are purchasing etc. So there's much more information we have on the customer than pure transaction data. The amount of data you can actually get as a bank is so rich compared to what we're currently doing. Banks in Việt Nam are still very much behind in terms of innovative technologies in data mining. In fact, very few banks in the world are close to the experience you can get from Amazon or Google. But you can close some of these gaps very quickly. It's a question of dedication to having the right talent and putting the resources in to collect this data and transform it into insights and ultimately action. We're really serious about this and are hiring people who are well ahead in these capabilities to join Techcombank.

However, we have to be very clear with customers on what kind of data we're using, in what context and for what purpose we're using data. As long as you're very transparent about it and show the value you can create for the customer, experiences show that most customers are very happy to share.

Large banks/corporations are not as agile as tech start-ups. What can they do?

Coming up with good ideas and doing things as quickly as a start-up is very tough. But adoption is where the difference comes. If you're a start-up, it takes you much longer to convince someone about your product. Whereas if you're a big company and you have gained the trust for your company, when you say "Here's a good solution," adoption ranges in the millions in a relatively short period of time. It's a race between the innovativeness of the small ones who are much faster to the market but need the adoption at scale, versus the incumbents who need to transform to be faster and have the platforms and financial means to scale up.

Ultimately, it's about who will bring great solutions to a broad set of the population. It's unclear who is in a better place. We have examples in China, where the likes of Alipay and WeChat have taken over big pieces. But we also have a lot of other markets where the established banks have transformed themselves to be able to compete very successfully against start-ups.

What I've seen in a lot of situations is you start by competing, but in the end, you will be collaborating. Creating great technology will in turn create a lot of value for customers.

The ones I'm concerned about are the Gojeks, the Grabs or the Facebooks, because they have a high level of customer interface. Their reach is tens of millions of people in every country. If they suddenly start to become a bank, what then happens can be quite seismic. These companies are trying to get digital banking licenses in Singapore. In Thailand, Line - which has 40-50 million customers - is starting to set up its own digital bank.

How do you prepare for that in Việt Nam?

To be fair, the jury is still out to see if that's really working. In some markets, even in Singapore and Thailand, it's unclear which customer problems these new companies are really trying to solve. In markets like Indonesia for example, where Gojek is very strong, they solve a customer problem where banking penetration is not so high and they offer a much more convenient service compared to what banks can offer. But to give you an example, in Thailand, you can do any kind of payment straight from your banking app. We have not seen big inroads from Alipay, PayPal, or any of these tech giants because there is no real pain point. Gojek and Grab are aggressively going after the financial service play, but they're paying a lot of acquisition cost.

Is there an intrinsic customer problem in these markets which would not be solved if they would suddenly disappear? Not really. Therefore, I think it's unclear if it would be sustainable.

In Việt Nam, it's our job to figure out if there's a customer problem that our existing solutions are not solving. If that's the case, we really need to do something. The fact that Techcombank has created zero-fee accounts already made it much harder for others to come in. But if a technology can provide mass access to financing, it invites people to come in and start establishing a foothold. And that's where we need to figure out how we respond.

Can you take us through Techcombank’s operational metrics in the second quarter of the year?

Our credit growth will continue the momentum. We will probably see acceleration compared to the beginning of the year. In terms of non-performing loans (NPLs), we're in a good spot. A lot of our credit exposure is in areas which are less affected by COVID-19. The exposure mainly sits in real estate and mortgages, with relatively less impacted customers. The overall number of NPLs will be very stable.

People are coming out of the crisis with a better handle on it. The stimulus programme by the Government was also helping, so we have a lot of liquidity in the market. Some companies have restarted investments and need working capital. In particular, the wholesale banking side will find attractive opportunities.

How will you receive the new demand arising from the pandemic and support those affected?

First and foremost we need to acknowledge that this and also the next year are still very challenging, for our customers and hence also for the banking industry. We have already provided a lot of support to our customers, in the form of more credit lines, restructuring options, interest rate reduction, etc. We monitor the situation very carefully and stand ready to help our customers depending on how the situation develops going forward. Our focus is very much on our existing customers, so we will probably be more careful with expanding into new areas or into new relationships.

In the first half of 2020, Techcombank recorded a profit before tax (PBT) of VNĐ6.7 trillion (US$289 million), up 19 per cent year-on-year and accounting for 51.5 per cent of the full-year PBT target approved by the AGM. The bank’s profit after tax reached VNĐ5.4 trillion, compared to VNĐ4.5 trillion achieved in the first quarter of 2019. The bank continued to lead the market with a healthy 2.9 per cent return on assets (ROA) for the 12 months ended June 30. The capital position was strong with Basel II CAR at 16.9 per cent. Total deposits as of June 30 were VNĐ249.9 trillion, a year-on-year increase of 13.4 per cent. CASA deposits grew by 29 per cent year-on-year to VNĐ86 trillion, while time deposits improved 7 per cent to VNĐ163.9 trillion, reflecting the bank’s continued focus on CASA growth. CASA ratio was 34.4 per cent for the quarter ended June 30, up from 30.4 per cent in second quarter of 2019.