Lottner took up his position in Techcombank in August 2020. He previously held several c- suite positions such as chief transformation officer, chief data officer and chief financial officer at Thailand’s Siam Commercial Bank before joining Techcombank. Prior to that, he was in consulting. He was the senior partner and managing director of the Boston Consulting Group in Singapore and senior partner in McKinsey & Company.

Techcombank was established in 1993 and is now one of the more progressive banks in Vietnam. The bank has over 300 branches nationwide with more than 40 dedicated to small and medium- sized enterprises and mid-corporate businesses. The bank reported a strong performance in 2020 despite the economic and social disruptions caused by the pandemic. It recorded a healthy 3.1% return on assets (ROA) and an increase of 14.6% on total assets compared to 2019. Techcombank continued its robust growth in 2021 with bank customers reaching 8.6 million in total.

Here are the key points that were discussed during the interview:

• Talent, data and technology are the key pillars in Techcombank’s transformation journey
• Banks should work together to create a stronger joint infrastructure and stay ahead as a banking system
• Lottner believes that Techcombank has to start its transformation at the core to become digital 

The following is the edited transcript of the interview:

Foo Boon Ping (FBP): Today we are very excited to have Jens Lottner, the CEO of Techcombank. It is a pleasure to have you on this programme. You bring many experiences with you from a bigger organisation. Obviously, Techcombank is a smaller bank. But today it’s all about agility. Size doesn’t matter and you are in an industry in Vietnam that is growing. The future is pretty much ahead of you. Tell us in terms of what is the most important opportunity and challenge that you see leading Techcombank going forward?

Jens Lottner (JL): It's always easier to operate in an environment where the underlying secular trends are in your favour. The opportunities are really abundant. What probably is the most exciting piece here is that as the banking system is developing and changing, the restrictions in the past, which used to be physical infrastructure, etc., are all becoming a little bit less relevant. Entry into segments are very different than what they used to be. State-owned banks are still ahead if you look into pure size. But if you see growth, the smaller ones, the joint stock banks are clearly gaining territory. That is where the opportunity is: using technology, using data, putting the right talent together and then start creating new business models to go into business segments which were not there beforehand.

If you take our very specific case, we were always at the higher end of the pyramid. We were very much going for and serving mass affluent customers, large corporations, because that's where broad infrastructure is not as important. But if you go in a digital way, there's no restriction. As we have invested a lot in technology, we have seen a massive increase in our customer base, that is why we have not expanded our physical footprint. So opening up opportunities to go into segments, which were beforehand reserved for large infrastructure banks, that's gone. Using data, using technology, you can create completely new offerings which allow you to provide services and solutions which we're not there in the past or only at very different costs. That's what we're looking at. Can we use these new enablers to really create something which is very unique and can allow us to expand our customer base? That's the opportunity. The challenges, to a certain extent, it's the abundance of opportunities. So it is really about focus.

Strategy is about what you're doing, but even more important, what are you not doing. Sometimes you can lose that focus. Making sure that a bank of a certain size can still act nimble and with agility – that's the other challenge.

FBP: You mentioned a lot about the opportunities in Vietnam as a market that is growing. Last year, amid COVID-19, your revenue grew by 28%, your profit grew by 23%. You're projecting the end of this year to grow by another 25%. That's on the back of a recovery. What surprised you when you entered Vietnam or Techcombank?

JL: Having worked a little bit in Vietnam before, the surprises were a little bit muted because in the end, it's the difference between experience and expectation. Overall, the real difference is you have to change your mindset. Right now, we have roughly 8 million customers. Getting 1 million or 2 million customers would mean you increase your customer base by 25%. For a lot of other markets, that is a tall order. But in where we are in all of this, a lot of our numbers should and must increase by double digits. That's not just profit and financial numbers but it really comes to new-to-bank customers, product holding gathering. You just need to think in very different dimensions. That's the biggest adoption you need to make to just saying this is a very different dynamic with a small bank compared to some of the really large players in the market. Therefore, baseline effect plus growth of the environment will need to get you to 30% to 50% growth numbers and that is what you really need to hit if you want to be meaningful going forward.

FBP: Techcombank is very focused on its technology being a technology-driven, digital-first, customer-centric bank. It’s gone through a phase of transformation already. Perhaps transformation that is really focused on the frontend customer experience, on internal process optimisation. What do you see going forward in terms of how would that transformation journey continue? Obviously, you have a team, a chief transformation digital officer from OCBC.

Transformational building blocks

JL: That's an absolutely key pillar. If we define our strategy right now, there are three key pillars: technology, data and talent. You refer to some of the people we have hired. Pranav Seth, who joined us from OCBC, is really a digital banking veteran. Then we have at the highest level a chief data officer who joined us from Standard Chartered who knows a lot about global efforts

in new technologies, artificial intelligence. So we are really putting our bets down on that. Over the next five years or so, we will invest in these new things, more than $500 million, in order to make sure we're really getting this up to the level we want to be. If you ask me for experiences, there are a couple of things which we learned collectively.

One is don't do too much compromises when it comes to technology. If you're building technology incrementally, you will see that three years from now, you start going back to the drawing board. So our intent, with the full support of the regulator, is to move the bank to the cloud over the next two or three years. We will not be deploying some applications in the cloud, but we will be a cloud-based organisation. It is a risk. What we will announce in the not so far future is a strategic partnership with one of the big cloud providers who are excited to show what can be done right. They will go well beyond what they normally do with clients to show the case of a bank who's really willing to go the extra mile and what we can get out of that. Taking that risk is one element.

The second one is data, the forgotten element. You're not building it with the data-first mindset. We think of data in a much more integrated fashion than what I've seen done in the past where people right now are trying to wrap the data wherever they can get it. As we start creating new applications, data is an absolutely integrated part on how we're harnessing it. If you want to create new experiences, these all need to work hand in glove. So you cannot think about your core on one hand then think about your tech marketing stack on the other hand and then think about your data lake somewhere. These all need to come together so that you create the experiences that are already in mind. In a lot of cases, technology is still somewhat built independently.

The implementation and the infrastructure, all of these are done by the experts. Because for a bank in our market, the real cost is not implementation of technology, it’s lost revenue opportunity if we don't get it right. Shifting that mindset requires business to fully come to the table. You cannot outsource transformation to a chief transformation officer or a technology guy. You're leading that transformation because it's a business transformation.

FBP: What are the challenges that you face in Vietnam in terms of basic infrastructure, financial services, telecommunications, cloud in terms of where it's deployed? What services are available now from a regulatory perspective? Is Vietnam, the State Bank of Vietnam (SBV) ready for the banks to go on cloud?

Strengthening the banking industry

JL: SBV is very much involved and we clearly explained our plans and so far, we have not seen anything but support of what we're trying to do. We need to keep them abreast. Trying to take Vietnam to a very different level of digital infrastructure is clearly a declared plan and banks play an important part. What we are trying to do right now as a bank, is we try to engage with our counterparts in other banks and also with the infrastructure provider as well as SBV to say, can we work together to create a stronger joint infrastructure? If we think from a competitive dynamic, the initial question is, why are we seeing very strong e-wallet players? Why are we seeing very strong fintechs in the payment space? It’s because banks have not solved some of the customer problems because our infrastructure is not able to connect us as seamlessly as we need to. If we want to stay ahead as a banking system, if I take the fintech competitors aside for the time being, we need to get our own house in order first. That is where we're trying to make proposals and work with SBV. We need to upgrade, no question. But I believe it's rather a willingness of the leading banks to work together. The customers are ready and I think SBV would be supportive.

FBP: Vietnam as a country has been very resilient in the course of COVID-19, in terms of how it responded, how it has controlled the spread of the virus. So talk to us in terms of the resilience of individual institutions as well as the resilience of Vietnam as a country in terms of how you've been able to respond to COVID-19.

JL: The government did a pretty good job in keeping this under control. But the real solution will ultimately only come if we get vaccination. Everyone has to do his or her part. The banking system came through it pretty well and the main reason is because we have not been affected as much as some of the other countries in their economy. Because a lot of domestic demand were holding up and a lot of the export-driven industries were still producing. We're not so reliant on tourism yet so it's only 4% of gross domestic product (GDP). So overall, banking is relatively resilient. Non-performing loans (NPLs) had been worked down for quite some time. Provisions were built up.

If you take our bank, resilience had to come on to very different levels. Are we able to run our operating models even if we had people work from home? The answer is yes. Investments in technology, which we did beforehand have put us in good stead. If we would be running the bank with 70% of our people working from home, we would still be able to handle this. Our systems enabled this remote and social distance operating models. Can we serve all our customers? The digitisation effort, which our bank did in terms of getting people on mobile has helped us a lot. Both our apps, be it Android or iOS, ranked the highest in the market. A lot of people downloaded it and found it very convenient. Transactions have gone up dramatically.

Transaction volume has doubled in the last year and most of that was on digital. So our system just needed to increase by that. That's one of the reasons we are also moving to the cloud, because we see that in the current growth trajectory, we would need to roll in servers by the day and this is just not a sustainable model. So from that perspective, the models have proven to be resilient and very clearly, the more banks that invested in technology, the more they came out of that unscathed and also on top compared to other guys.

FBP: We talk about being data first, customer-centric and being digital-centric. What’s the difference now between digital-only banks and traditional banks? Especially for you who’s smaller and has a head start in digital transformation. Does it make a difference if you are digital- only or you are digital first?

The first step to become digital

JL: We're all trying to get to the same goal. For us, it's just a matter of how to get there in the most efficient way. I believe you need to transform at the core of the bank. You need to take the whole organisation with you. So we don't have enough resources to do both. We still have a lot of overhead, but we can do this over time, start putting more and more technology. The bank needs to be digital or technology enabled. When I say we need to put the bank over the next two or three years on to the cloud in a very aspirational programme, basically it tells you in two or three years we will be there – a digital bank. We’ll start building it if we do it from the onset. But the difference then would be that I have a bank with 8 to 11 million customers at this point in time and the right infrastructure. That makes a huge difference because a lot of these digital banks. The customer acquisition cost will be a major impediment.

FBP: Techcombank is small in terms of asset size and in terms of capitalisation, about $5 billion. You’ve gone on record that you want to bring it in five years to $20 billion. In terms of capital and asset size, you’re small but in terms of customer count, you're about 8 million. What kind of challenge does that present in terms of budget? With digital transformation you have to do everything all at once. You’ve got to do it pretty holistically.

JL: If you want to be a top 10 Association of Southeast Asian Nations (ASEAN) bank, the entry ticket is around $10 to $15 billion these days in terms of market cap. So that's the aspiration. If Vietnam continues on the trajectory, it's a question of when it will be the second largest economy in ASEAN just because of the 100 million population and all of that. If you're then one of the leading banks in that country, why would you not be among the top guys? What do you need to do in order to get there? That comes down to do you have the means, the profitability to invest where you need to invest? We will show relatively good numbers and we're not too far away from showing $1 billion profit per annum. So if you’re saying for a good company, say 6% to 8% of revenues would actually be a good information technology (IT) budget in five years. If you run the numbers, you would be at $150 million to $200 million per year. That already buys you some budget to invest.

When I mentioned the $500 million budget over the next year over and above what we have, given our profitability, we can afford it. That also sets us a bit apart from some of our competitors who could probably do it but it would work itself a little different through their profit and loss statement (P&L) and would raise different questions on cost-to-income (CI) ratios and all of that. Whereas we can do this on a self-funded path as long as we show the revenue growth in such an environment, we should be okay.

FBP: In terms of the opportunities going forward, Vietnam is still a traditional kind of lending business: mortgages, automobile loans, personal loans. Talk about wealth management and F1 customers. Now with the data technology, you can democratise wealth management. How much of that is now being enabled by technology that you can start to change your business model, look at some of the fees that can be generated from that part of the business?

JL: Wealth management has always been a very big topic for us. We are probably in media high and double-digit market share in primary bond issuance, which is one of the key instruments which are at the disposal of wealthy investors. We are very big in the mortgage space. A lot of affluent customers are – because of how we are working with developers – very interested in taking this up either for their own or for investment purposes. So even if our market share is in total balances or total deposits, 5% or so, it depends on how you measure our relationship with affluent and mass affluent customers. It probably stands at 20% to 30%. We have one of the most advanced fund companies on our Techcom Securities (TCBS) shares. We are very serious about that and we will channel a lot of investments in this area.

FBP: You have been in Asia for two-thirds of your working life, in the early 2000s. You have been in many roles in consulting advisory and in leading banks, in different roles. What does resilience, operational and organisational resilience mean to you from a personal perspective? And how do you take failure?

JL: If you think about where resilience is coming from, it has a couple of traits. The first one is more about positive thinking. If you have opportunities ahead and challenges, it's better to look into the opportunities first then think about challenges as problems to solve. And if you have the background that I have, usually you're always thrown into these situations where the problems have not been solved beforehand. So your DNA is wired towards there's an opportunity, let's just get it solved. This positive thinking is an important element. Never give up. There must be a solution. It cannot be that insurmountable.

It sounds a little stereotypical but if you fail and you don't learn from it, that's really bad. But if you're saying it didn't work, let's do it again or try something else, what else can you do? That's important. Ambiguity needs to be part of your life. Last but not least, you need to be able to pace yourself. It’s a little bit like a marathon. If you start sprinting from the beginning, that's really bad. But at the end, when it really starts to count and you don't have certain reserves and can't really push through, then it's also bad. So don't get too exuberant when things are going your way. Put this organisationally, it works roughly in the same areas. So we're very much focused on opportunities. Our discussions at the management team – if there are problems, solve it because here are the opportunities we’re going after. We work in a way that we're flexible enough to adapt and react to new information relatively quickly.

FBP: How do you apply the personal values to your management team in terms of an organisation of resilience?

JL: What I always tell the guys, your job as a leader is to reduce ambiguity. If it comes down to your staff, you need to create clarity and focus, so don't broaden the amplitude, narrow it down. And that's what we're doing collectively as a team. A lot of the guys I'm working with, they have very similar traits. That is then what ultimately translates to organisational resilience. Resilience is very much like take whatever energy you have and deploy it in the most measured and efficient way.

FBP: How does that apply to the external party that you work with? How do you, based on those values, select the partners you work with, whether it's technology or otherwise?

JL: Do we see the same picture? If you need partners, you need to align in spirit first because we cannot put everything in black and white. Some of the strategic partnerships, like for example, with the cloud provider, started off as: Here's what we want to do for Vietnam. This is how we think about transforming Vietnam with different partners in an ecosystem. Is this something which excites you? And if you're excited about it, are you willing to chip in? Are you willing to grow with us on that journey? What we have built up over the last couple of years and our track record, together with some of our shareholders, is that we’re probably seen as somebody who's not just talking the talk, but who's been delivering it. Given then the credibility, the people are saying, ‘If you're on it, let's do this together’, that creates resilience in itself because you have more of the capabilities, a joint vision, which creates that energy, but also flexibility. Sometimes we need to deviate from the path while not losing the goal. That's what we're trying to do. That’s how we’re looking into our partners and creating these ecosystems.