Forging your own challenger bank: TNEX

Why did your bank decide to launch a neobank/challenger bank and how did it proceed?

The decision was made just under one year ago when I stood in front of my board and outlined my vision for a new type of bank for Vietnam. It would be a technology-led bank like no other ever seen. It would have no branches. Its digital business, operating models, and data science would, for the first time, make everyday banking and digital commerce accessible, secure, and free for every person and small merchant in Vietnam, while also being a profitable business.

I announced this perhaps a little too boldly, as at that time I didn’t even have the required team in place to execute. My pitch was, in the main, greeted with the healthy head scratching that many start-up type projects encounter. Thankfully, my vision resonated with my Chairman and CEO.

I’m pleased to say that TNEX is the first of a new breed of digital banks for Vietnam and it will launch this week.

So why did we do it?

Vietnam is a young country, with 80% of people being under 52 years old, geographically dispersed, and digitally obsessed. But it had no digital-only banking offering. As of Jan 2020, here are some other notable figures:
1. 148 million mobile phone subscriptions
2. 68 million internet users; who spend on average 6 hours and 30 minutes a day on digital media. An increase of 6 million (+10.0%) between 2019 and 2020.
3. Internet penetration of 70%+
4. 65 million social media users
5. Zero Digital Only Banks

At its broadest, our target audience is approximately 69% of adults in Vietnam who are unbanked or underbanked and thus depend on cash to buy or sell goods and services. Our digital banking business, operating model, and advanced technology architecture drive a low cost of manufacturing, distribution, sales, and marketing. This allows us to serve the un/underbanked of Vietnam in a sustainable and ethical way.

Our go-to-market target audience and supporting proposition positions TNEX as follows:

TNEX-Consumer - A free, fun, hyper-personalized lifestyle bank designed for Millennial and Gen Z customers. Providing our customers access to offers and features which match their individual daily lifestyle needs e.g. food, entertainment, chat, money management & budgeting - amongst others.

TNEX-Merchant - A free, everyday bank for all small merchants in Vietnam which also gives them access to the best tools and extensive data to digitally market their products, increase their sales, and reduce their costs. We want to help merchants grow and incrementally transform their businesses in an increasingly digital, post-COVID world.

Feature List - TNEX-Merchant

1. Free everyday business banking services: Including a merchant debit card, ability to transfer and accept money 24/7, pay bills e.g. for electricity, water, internet and to pay their staff electronically.

2. Drive sales; allows merchant to run real-time targeted marketing and sales campaigns. TNEX-Merchant automatically sets up an individual sales website for each merchant.

3. Accept digital payments at no cost – Merchants can issue offers & campaigns, issue TNEX- QRs and accept TNEX-QR codes at no cost i.e. no specialized hardware required, no intermediary fees. The payment is credited to the merchant’s account immediately.

4. Communicate with their customers - Using TNEX-Chat, merchants can live-chat directly with individuals or groups of customers.

5. Apply for a business loan - a quick loan procedure supported by competitive terms.

6. Support tools; inventory management, cash flow management, order management and complaints management – to help run their day-to-day business

How/Challenges/Journey

While advanced digital technology and data science is at the very heart of everything we do, getting the technology “right” was not our greatest challenge.

Finding the right talent and creating the right culture were the most difficult parts of our TNEX journey so far. New technology overlaid on an old culture never works.

At TNEX, we openly celebrate our people and culture as our most valuable assets. I want all TNEX'ers to challenge me, each other, and the banking status quo to innovate and to thrive.

Right now, nobody in TNEX expects a traditional management style, they expect one asking "what do YOU think is the best idea?" In TNEX we work under a strict rule that “the best ideas must win”, notably the “best ideas” have often come from our young recruits, rather than from our more seasoned team members.

Our goal is to always give our customers the lifestyle bank they have told us THEY want. We will never attempt to ‘buy’ our customer’s loyalty through concentrating on periodic offers and promotions. We want TNEX to be the bank that supports their daily needs and future dreams, putting them in control of their money and their data.

Over the last 10 months, we have spent hundreds of hours face-to-face with our target consumers and merchants - actively listening to them and then, and only then, designing and building features e.g. personal money management, free everyday banking, in-app chat. The TNEX-Consumer’s user interface and user experience are perhaps the most visible results of our conversations; its game-tech, virtual world mirrors how our target customers have told us they want to digitally interact and engage with a bank. TNEX-Consumer was actually built in partnership with a gaming company, not a traditional System Integrator (SI).

Going forward, our technology and next-generation data science capabilities now allow us to continuously listen, react, and adapt to what our customers really need to live their lives a little better. We are a bank that always operates on real-time customer feedback. At TNEX, data is the very lifeblood of what we do.

What are its main competitive advantages? How does its offering differ from that of the incumbent bank? Is it targeting a different type of customer?

At the highest level, TNEX being the first digital-only (no branch) and free everyday banking experience that is open to all SMEs and consumers in Vietnam.

TNEX is an end-to-end digital bank, underpinned by digital business and operating models. This allows us to manufacture and distribute our products and services ~97% cheaper than a traditional bank. Most importantly, this helps us remove a serious barrier to the adoption of banking across Vietnam (i.e. the cost of banking to customers).

Our TNEX values put our customers first at all times. We are open and honest about how we will serve our customers and in the case of everyday banking (banking account, debit card, payments) that means no sneaky fees or minimum balance conditions - free means free.

The average age of core banking technology in APAC is 17 ½ years old. Our technology is brand new, allowing us to innovate and react quickly - at low cost and within acceptable risks.

Our low-cost model allows us to grow our revenue, based on “digital cents rather than digital dollars” driving quickly towards profitability. We have already started to design 22 first-to-market features for 2021, which will accelerate our revenue growth and we firmly believe will further delight our customers.

At a more granular level, we detail our advantages into four groups (see below). It is the sum of these “groups” and how they interact, which gives us our strongest competitive advantage – an undoubted market-leading customer experience.

Four Groups – TNEX Competitive Advantages.

1. TNEX Business Model
- Low cost of acquisition and servicing (~97% cheaper than a traditional bank)
- Targets micro-segments (youth population & MSMEs)
- Simple products, pricing, and transparency
- High degree of personalization
- World-class customer experience (CX)
- Embedded in our customer’s daily lives
- Delivers Banking-as-a-Service           

2. Culture and Talent
- High ratio of engineers and design professionals including psychologists & data scientists
- Multi-disciplinary teams, working together
- Flat, non-hierarchical structures
- Employee value proposition for entrepreneurs and millennials
- Values and purpose-focused, always putting customers first

3. Technology
- Low-code core banking system (Mambu)
- Modular and Open API’ed (internally and externally)
- Real-time, all the time
- Zero legacy / no technical debt (Average age of core banking systems in the top 100 banks in Asia Pacific is 17.5 years)
- Scalable: Hybrid-cloud deployed
- Highly secure
- Collaborative open banking platform i.e. Banking-as-A-Service, Fintech integration.
- AI & ML driven by CDP and real-time advanced analytics
- DevSecOps

4. Operations.
- No branch network dependency for customers
- Lean target operating model: 141 FTEs = 3M customers
- Intelligent, data-driven, automated workflows
- Delivers a low cost to income ratio (target: ~21% in 2023)
- Leverages “non-traditional” data for real-time risk and fraud management and customer service.

How does its offering differ from that of the incumbent bank? Is it targeting a different type of customer?

MSB is a successful traditional bank, one that is well advanced in digitally optimizing and transforming their core value proposition: A business model and value propositions that focus on mass affluent and affluent customers, large corporates, and SMEs. TNEX’s focus is different. Our focus is mass customers and Micro SMEs.

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

TNEX is an end-to-end, stand-alone digital-only bank, from its core banking engine to its digital channels and supporting business functions. We have built / implemented everything from scratch, using the latest technology, and using APIs and business partnerships as required to support any external dependencies.

TNEX operates under the banking license of MSB Bank. Therefore, we partner with MSB for financial and risk, regulatory, and compliance support.

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

TNEX is just about to launch. We expect to acquire 1 million customers and 100k merchants in 2021 and 3 million customers and 250k merchants by 2023.

More generally how do you see neobanks competing in the future banking landscape?

I have never been comfortable with the term “Neobank”. I prefer to concentrate on “NeoCustomer”, customers who want to be served digitally.

I continually have black and white conversations with colleagues across the banking industry. Black: those whole believe that the fundamentals of banking do not need to change, an optimization of the existing banking proposition will suffice. White: those who understand that the industry needs to transform. They believe that customers want a digital experience that positions banking as a support to their lives, an experience in which banking is embedded, invisible, an enabler and that only appears when it is required e.g. making a payment.

In TNEX we talk about “second part of the sentence banking.” Let me elaborate. We believe that no customer has ever said “I need a loan”, full stop. What they mean is in the second part of the sentence: “for a car”, “to support my children’s education”, etc. We have built TNEX to support our customers’ needs first, not to provide an ‘island of banking.’

TNEX is better described as a customer experience company rather than a bank.

Do you believe that a Netflix-like or an Amazon-like neobank could fundamentally reshape banking services?
 
Yes, it’s already happening, as demonstrated by Amazon, Revolut, Tinkoff, Starling, Oak North and Chime - amongst many others. Customer experience is a major driver of loyalty. Big tech, Fintech, and challenger banks live and die by customer experience. However, there is a key issue which needs to be addressed by big tech to push forward: customer trust and data privacy.

In defense, traditional banks can and some have already adopted the same technology and organizational ways of working as those of big tech and neos. However, very few have managed to deliver on the key ingredient for success, which is cultural change.

As I have already mentioned, I fervently believe that new technology and new talent overlaid on old culture, business models, and traditional leadership, will always fail.