Data, Digital, Banking and US-China Trade Tariff – From A Banking Perspective Sector Solutions Group January 2019 Disclaimer: This material that follows is a presentation of general background information about the Bank’s activities current at the date of the presentation. It is information given in summary form and does not purport to be complete. It is not to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. This material should be considered with professional advice when deciding if an investment is appropriate. UOB Bank accepts no liability whatsoever with respect to the use of this document or its content.
8 Megatrends for 2019 & Beyond Anti-Globalisation Empowerment of East Disruption of trade flows ( U.S.-China Rise of China and ASEAN tariffs) Rise of the middle-income consumer Nationalism vs Globalisation One Belt, One Road Made in China 2025 Banking Digital data/ 10 years after Lehman Engagement Regulation to digitalisation 10 years after iPhone was launched Internet of Things (IoT) Agile Human disengagement Learn, re-learn, unlearn Discomfort is new norm; Evolution of ways in which we even some rebel spirit communicate- Hi-Tech, Hi-Touch and Hi-Trust Blurring Boundaries Inflation & Dis-inflation The emergence of business and digital Inflation of asset prices ecosystem collaboration & dis-inflation of goods & services 1
Banking 10 years after Lehman Regulation to Digitalisation
10 years after Lehman crisis What has changed? Are we safer now? then, it pays to remember that the roots of the word “credit” comes from the Latin “ ”, meaning “to believe”: finance does not work without faith. The irony, The Lost Decade of the World 2008 - 2018 China’s new consumption 3
Basel III Expanding its Prudency Capital Basel I Strengthens all 3 Focus on short- components and long-term (capital, risk- resiliency against weighted assets liquidity shocks Basel II Capital & ratios) Regulate leverage for Basel III Capital Liquidity Leverage banks (model- free fashion) “Basel IV” Capital Liquidity Leverage RWA Focus on reducing excessive variability in RWA calculations
Traditional Banking Balance Sheet Equity & Liabilities Assets Risk weighted Liabilities assets On balance-sheet assets Tier 2 Tier 1 Common Equity Off-balance sheet items 5
Basel III & “IV” Affects All Parts of Banks’ Balance Sheet Proper ALM & liquidity management Equity & Liabilities Assets Risk weighted Covered bonds Retail loans More stable assets Retail funds funds Wholesale funds Wholesale loans More Tier 1, Tier 2 & senior capital & Bail in language Liquid assets loss- absorbing Review of Common Equity internal models Off-balance sheet items & other risk exposures, Impact: supplemented with a “simple” Numerous stress-testing leverage ratio Known unknowns vs unknown unknowns Focal point of banking growth has shifted from the West to the East 6
Banks have larger capital buffers to absorb financial shocks 2018: Big banks have reduced reliance on short-term funding , replacing it with deposits 7 Source: Bloomberg
Introducing Sector-driven Strategies Bringing UOB and ASEAN closer to you Data Sector Sector Insights Analytics Solutions Thought Data Static Data Leadership Intelligence Industry Regional Expansion Flow Data Support specialisation Behavioural Value Chain Holistic Banking Data Analysis Solutions Focused on 6 Prioritised Sectors Footprint in 6 Major Markets Construction/ Industrials TMT Infrastructure China Malaysia Thailand Real Estate & Consumer Hospitality Oil & Gas Goods Singapore Indonesia Hong Kong 8
Data and digital 10 years since iPhone was launched Internet of Things (IoT) 9
In 10 years, we have seen the rise of Technology companies – data and digitalisation of global system Top 5 companies by market in cap in 2006 Launch of WeChat and The top 5 companies the year that the China by market cap today Launch of smartphone market saw its is made up of Ant Financial highest YoY growth rates technology ever companies 2015 2006 2007 2010 2011 2014 2018 Launch of Launch of iPhones iPads Year that the term “sharing economy” was introduced to Oxford Dictionary Fronted by Grab, Uber, Airbnb, Go Jek 10
Digital companies have been disrupting traditional businesses and will continue to do so Digital companies have been disrupting traditional Financial institutions need to innovate and businesses and will continue to do so recognise growing relevance of these players In travel…. Rapid digital disruption will displace 40% of incumbent companies across 12 industries in 5 years 1 In transportation… Since 2000, 52% of companies in the Fortune 500 have either gone bankrupt, been acquired, or ceased to exist 2 Lifetime expectancy of companies on the Fortune 500 In retail… list has fallen from 23 years in 1965 to 15 years in 2014 3 1. Digital Vortex: How Digital Disruption is Redefining Industries (Global Center for Digital Business Transformation); AT Kearney: Winning in Digital Innovation: Turning Scale & Legacy into Strengths 2. Darwinian Digital Disruption; Survival of the Fittest, 2015 3. AT Kearney analysis of Fortune 500 data 11
Narrowing the Distance between Organisation and Customers PAST PRESENT FUTURE Broadcast Interactive Engagement (Push) (Dynamic) (Live) 12
Time Taken to Download Content Greatly Reduced 1G – Analog voice 2G – Digital voice 3G – Mobile Data 4G LTE – Mobile Internet With 5G (2020 onwards) able to support up to data volumes up to 1,000 times higher, consumers will download content more often and in greater quantities. Source: CNBC 13
Data is the new currency The Evolution of Data Analytics How can we make it happen? Company’s P&L Static Data Prescriptive What will Company’s Balance Sheet Analytics happen? Predictive Why did it Analytics happen? Value What Diagnostic Transaction Data Analytics happened? Flow Data Market Data Descriptive Analytics Utilities Telco Behavioural Machine Learning Payment Transport Companies Data Difficulty Social Media Source: Gartner; Source: UOB 14
How Go-Jek is changing Indonesians Go-Jek has created new jobs to Number of Indonesians with address 15% of the bank accounts has country’s employment , grown to 49% of the or about 1 million people. And adult population in 2017, from that’s just 3 years since the app just 20% in 2011 was launched. After partnering with GO-FOOD, 72% of Indonesian micro-entrepreneurs have added banks feel threatened by 80% more customers and Go- Jek’s e-payment service. nearly doubled their overall 62% polled also perceive Alipay orders. and WeChat as competition Go-Pay processes half of Go-Jek's 100 million monthly transactions for its 20-25 million monthly users 15
How Grab is disrupting the ride-hailing industry As of December 2017, more than Grab has assisted in opening On average, Grab commuters 1,000 merchants were reach their destinations in less bank accounts for more using GrabPay in than half the time ( 52% than two-thirds of its driver- Singapore. reduction in travel time partners (640,000 people), GrabPay Credits , which is a introducing them to banking and on average ) compared to other financial services for the cashless top-up payments option, public transport options in their very first time in their lives. has grown more than 80% cities. month-on-month Source: Grab 16
Capturing the bulk of our expenditures Food and transportation expenses are key CLOTHING 4% FOOD 25% ACCOMMODATION 16% TRANSPORT 18% Source: SingStat 17
Demographic vs Psychographic Demographic Psychographic vs Broadcast Marketing Micro-Segment Marketing Values Sex/ Age Attitudes Country Behaviour Profession Interests Income 18
Our World Today Changing the way we go to market 19
The Future of Stores Customer Engagement & Experience • Gather and engage consumers • Lululemon Athletica – Host yoga classes • Urban Outfitters – Store with bar & restaurant Showrooming • Platform to showcase product, reviews and manufacturers’ notes • Samsung Experience Store – Showcase full range of smartphones, tablets, laptops, wearables, TVs and audio products Distribution Centre • Leverage the outreach of numerous store locations as beginning of distribution chain • IKEA – Store acts as warehouse Traditional in-store experiences • Platform for marketing and sale of products Data Analytics • Use purchase and viewing information of • Limited customers’ engagement customers to recommend subsequent purchases • C&A – Displays facebook likes on hangers of clothes From transaction to interaction 20
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