SINGAPORE (Sept 19): United Overseas Bank’s (UOB) is leading the pack when it comes to digital banking among the three local lenders.

The continued investment in IT capabilities and cost rationalisation is priority for Singapore banks, notes analyst Ng Li Hiang.

UOB’s development of its own token technology for contactless ATMs and instant digital cards accords it first-mover advantage, says Ng, noting that the bank has a lead of up to 12 months on its peers in the mobile contactless payment space.

The bank has also launched Bizsmart, Singapore’s first cloud-based integrated solution for small and medium enterprises (SMEs) to streamline work processes and save costs, as well as build an ecosystem to catch startups.

“It is also embracing a culture of innovation by adopting new ideas and technologies,” says Ng in a Monday sector note.

And even with the higher cost-income ratios that these efforts bring remains, Ng is positive on UOB’s digitisation efforts.

“We see these costs as necessary to retain customers and possibly, lure new customers for faster and customised solutions as banks compete in the digital banking space,” says Ng.

UOB has also maintained a disciplined strategy which should ensure that IT costs not skyrocket, according to Ng. IT expenses made up less than 10% of the total expenses in the last 10 years, but IT expenses for FY16 to FY18 are expected to take up 8 to 10% of total expenses.

Maybank Kim Eng has a “hold” and target price of S$18.34 for UOB.

The counter is down 3 cents at S$18.83.