• Hong Leong foresaw the increasing digital demand in the marketplace
• Utilises launchpad and hackathon events to work on solutions on a wide array of issues
• Tan sees a very strong growth opportunity in the Indochina area

In this year’s Innovation Leadership Achievement Awards by The Asian Banker, Tan Kong Khoon was presented with the CEO Leadership Achievement award and the Hong Leong Financial Group was named as the Best Managed Bank in Malaysia for 2019.

Under his supervision, the bank became the first in Malaysia to introduce payment via mobile phone numbers with withdrawal of funds either via direct crediting or card-less ATM withdrawals even for non- customers. Hong Leong was also one of the earliest financial institutions to adopt big data analytics to identify customers’ additional needs for its marketing campaigns. It is also one of the first to work with IBM Watson to use artificial intelligence and machine learning at its call centre.

In the past year, he led the bank to transform its branches to add focus on wealth management, bancassurance sales and SME business, and worked on digitising its payment system, as he believes that these would continue to play a role in the financial sector especially for the wealth management and small and medium enterprise (SME) business lines.

In his conversation with The Asian Banker managing editor Foo Boon Ping, Tan further delves on issues involving the evolving banking industry.

Foo Boon Ping (FBP): We’re very happy to be speaking with Mr. Tan Kong Khoon, chief executive officer of Hong Leong Financial Group, one of the leading banking and financial groups in Malaysia. And today, we want to talk to Mr. Tan about his views on leading the financial group in what has been quite a transformation time as we deal with increasing regulation, the presence of alternative players and new technology that has come along available to the industry. So Mr. Tan, what are some of the leadership and management issues that you think are relevant for today’s leader?

Tan Kong Khoon (TKK): Let’s start off with what the financial world really is facing right now. I think it is dealing with the changing consumer behavior and expectations. And right now, the disruptors are using very advanced technology to overcome these challenges. The challenge for a traditional bank therefore becomes a case where how fast can we react? Are our systems agile enough for us to be able to modify them, to be able to cope with the increasing digital demand of the marketplace? And therein lies the financial industry’s challenge right now. How Hong Leong Bank has been doing it is, we’ve been very fortunate. We saw the change happening, probably about five, six years ago, and we were also very fortunate in the sense that our technology platforms were all open-format platforms. We were therefore able to very quickly adapt. But the challenges really is, what is happening where? And how do we deal with it? Because what happens to the client today is that the benefits that they enjoy in what particular activity that they’re doing – be it shopping convenience through e-commerce – they then expect that elsewhere, and that applies to banking, too. So from that perspective, we need to be conscious of not just what is happening within the financial arena itself, but what is really happening to customer’s behaviors across all his needs, and we then adapt and adopt.

Now, for us, the key here is how you then get your people to be able to identify these changing needs? Well, basically, it’s through their own experience, too. And it is also through letting them attend more conferences of various types, and that is very applicable in the commercial banking terms, especially for the business and commercial banking area, because there will be industry-specific conferences that they should be attending to see what really is happening within those spheres.

On the consumer side, it cuts across all kinds of consumer spending, be it the preference for an approach to buying an air ticket to how they are now paying for small items with digital payment devices, the tech type of cards. So that then becomes the areas in which we need to start to get our people to be more familiar with. And for our training, what we have really done is that we’ve started to put the main focus on two major areas, two programs. The first one we call digital dexterity, and the second one is value-based leadership. Big words. They mean a lot. 

But actually, these two modules are based on a concept of, essentially, design thinking, where we believe that through design thinking formulation, one is able to start to have very logical steps that people can take, our staff can take, to move from understanding customer needs and actually challenging our own way of delivering towards those needs, and there is a methodology, and it is actually measurable. So we’re basing these two big programs around that to try to start to future-proof our staff.

Understanding the customers’ needs

FBP: In terms of how you’re organized by silos, how do you break through the silos? How do you overcome the technology legacy? But more importantly, how do you become more agile, as you mentioned, more design thinking? A lot of it has to do with culture, the way the organisation is put together. Now, a lot of the thinking is, why don’t you create a bank from new? In Hong Kong, they are creating virtual banks as a stepping stone or as a way to learn how to be a digital bank.

TKK: I think in terms of evolution, it is not about offering only one alternative, which is currently the most in demand, the one that’s most in fashion. I think it is not just about coping with the digital transformation that is happening. I think the customer relationship aspect of it is still very important, because for us, our aim is really to be here over the long term. We want to be an integrated financial services group. So what we really need to do is tackle the problem from two perspectives. The first, I mentioned earlier, is really about how do you then borrow the best technology available, redesign it for the delivery to meet customers’ expectations? So it all centers around the customer experience.

But for us to be able to truly understand the customer and his needs, it all boils down to also not just technology and usage of transactional data to analyze, there’s a very huge dependency on developing a professional relationship with the customer. Therefore, and through that exercise, you look for opportunities that you can highlight to them. How you can fine-tune their portfolio, or what your requirements are. Steer them toward the more appropriate, more efficient system of delivery to their needs. And of course, it also helps us to a great extent, to develop that trust that is so fundamental to financial service delivery, between the customer and the banker.

FBP: So we talked about challenges. There are also enormous opportunities – new ways of doing business from traditional business. Whether it’s B2C or B2B, there’s now this opportunity in the B2B to B2C space. Talk a bit about the opportunity that has emerged and how has that shaped your vision for the bank in the next three to five years?

TKK: Actually again, that really depends on your understanding of what the customer needs are in the delivery of his company’s services, and then, from there, you work to find solutions. There are two ways to do that. The first thing we did was, probably about three to four years ago, what we did was we opened up Rada. We planted SME branches that we had, and we had 200 other branches, which means we widened our total network from 20 to 200-plus. And we then got those branches to act as the center of the community within their area. When you are within walking distance or very short traveling distances with your clients, you develop a completely different kind of, almost a very close kind of relationship with your clients. And today, you can better understand their needs and you can then look for solutions for them. So that’s one of the major things that we really did. Like I said earlier, it’s not just about the technology innovation perspective of delivery. It is very important. Don’t get me wrong. But at the same time, developing a closeness with your client is still needed in today’s world. So that in itself, means traditional banks actually have more than one way of interacting through the customer, and with that is choice, right?

Growth through technological collaboration

FBP: This year’s summit theme is on building the new financial institutions, and part of that is also looking outside of the institution itself. We talked about building community, we talked to Jimmy Wells, and we talked about ecosystems and platforms. When we were interviewing Hong Leong Bank earlier, you’re also working with some Chinese big tech, like WeChat. What are the key achievements for the bank in the past 12 months, and how does that set you in a better position?

TKK: Two things happened. One is that, for us to be able to know what really is happening out there, in other more developed countries, as well as how others are using the advancements in technology, there are a few things that we do. You mentioned partnering with the big boys. Of course. We were the first in Malaysia to work with IBM’s Watson. Artificial intelligence, machine learning – we applied it strictly into our call center. Today, close to 20% of my calls are handled by machines. So that is one big, giant move.

The second one, again, you mentioned it – the WeChat arrangement. Today, we are just dealing with providing the payment facilitation for Chinese visitors into Malaysia, and that number is growing by the day. So these are the big ones, but then, really, the issue then is, how do we as an institution, get to know what really is going on? An ideal way is actually to do launchpad events and host launchpad events and hackathon events.

Hackathons are slightly more specific because you identify an issue and you invite outsiders and your inside team to compete, to find a solution for something that you have really identified. Whereas for launchpad, it is an open format, and we usually invite those that come in not just to serve financial institution customers. They’re very wide open. So because as we are sitting there, listening to these presentations, we get an idea of what different industries are starting to benefit from the application of technology. And what we then do is that we will select people that we want to work with, respond to them, we give them projects and they essentially work on a solution for something that we have identified. So that’s how we do it.

FBP: And lastly, what were some key challenges in the past 12 months? What have you learned about the institutions as you responded to them?

TKK: I think it is very important for us to be open-minded and be willing to not just, well rather, to be willing to invite other parties, third parties, to participate in this search for a solution for the client. So I don’t see this as an “us against them” issue. I think it is a case where collaboration can bring the best for the customer, at the end of the day.

FBP: Today, Hong Leong Financial Group, among the big boys, you are somewhere in the middle. In terms of asset size. Obviously, your longer-term aim is, how do you see your future within that landscape?

TKK: Yes, in terms of assets (we are somewhat in the middle). I think as we move forward, there will be opportunities for us to grow even bigger, both locally as well as regionally. But at the end of the day, the focus really isn’t about just how big one is. I think it is really also about how profitable one is, and the value one brings to the community in which one operates within. And I think we’re doing that. We’re starting to bring on a lot of new technology to benefit the end user, and I think that’s critical. It raises the standards of the whole marketplace.

FBP: In terms of fine-tuning your focus on segments as well as in terms of your focus on the region. Today, you’re in Singapore, you’re in Hong Kong. And those are growth markets in the Indochina area.

TKK: Vietnam, Cambodia and we have something in China. Yes, I think the Indochina area – the opportunities will be huge for digital banking propositions because they’re a very young population which are very digitally savvy, and I think the number of unbanked is still huge. So I think those markets will offer us very big, strong growth opportunities.

FBP: It’s been great talking to you, Mr. Tan. All the best.

TKK: Very nice to talk to you. Thank you.