Is Timo a café or a bank? VinaCapital’s Don Lam reckons his popular Vietnamese neobank can profitably be both – and more. Vietnam’s emergent cashed-up millennials seem to agree.
According to a report by Eric Ellis on Euromoney, there are not too many banks that get reviewed on TripAdvisor. But then Vietnam’s Timo isn’t a conventional bank.
Part jazz café, part internet café, part air-conditioned respite from Ho Chi Minh City’s tropical humidity, Timo employs baristas at its shopfront, an old KFC outlet in downtown Pasteur Street.
The staff mix a refreshing – and free – lime soda alongside an espresso as their teller colleagues gather around you and any spare dong you might have quicker than you can say “neobank”.
Inevitably, because it is TripAdvisor, the reviews for Timo’s bustling Ho Chi Minh City (HCMC) hangout (NOT a branch) are mixed. Of the five posted since 2016, which is when Timo opened for business, two seem more like ads from insiders.
“For the first time ever, Vietnam has its first Digital Bank,” says one of those postings.
Two others give a generous pump-up.
“Cafe? Bank? Both? Unique!” says one.
A fifth isn’t so impressed with the financial part of hanging out at Timo: “Pleasant however incompetent!”
Timo – the name has no meaning in Vietnamese, but is an English-language portmanteau of time and money – was founded in 2015 by Vietnamese-Canadian Don Lam, one of the lions behind modern Vietnam’s emergence as an investment hotspot.
The business remains a work in progress. The deposits are in the hundreds of millions of dollars, so it is significant money. The competition is pretty fierce
– Cameron Warden, Timo
Lam is a so-called Viet Kieu, the term for the five million or so members of the ethnic Vietnamese diaspora that’s generally taken as shorthand for those who fled in the aftermath of the country’s communist-led reunification following the Vietnam War.
“I was one of the boat people,” says Lam, as he describes his own perilous escape aged 10 across the South China Sea to Hong Kong, one of 270 refugees crammed into a boat built for a fraction of that number. “I was hungry and thirsty all the time.”
That was in 1979, four years after South Vietnam had fallen to the northern communist regime, which then embarked on a brutal re-education of – as Hanoi’s ideologues saw it – the freewheeling southern population.
Lam’s family eventually found their way to Canada, where Lam went to school and qualified as a chartered accountant; a job with Coopers & Lybrand took him back to Vietnam in the middle of the 1990s when the country was in the early throes of market reform.
“My family thought I was crazy to go back,” he says.
But Lam stayed and, in 2003, founded one of Vietnam’s first dedicated investment houses, VinaCapital, which is now one of the country’s biggest private investors.
Lam says his inspiration for Timo was mostly Prague-based Air Bank, which started a decade ago in the Czech Republic with the mantra of being “the first bank you can like”.
Lam says he saw parallels between banking in eastern Europe and Vietnam: both regions had emerged from communism, but their legacy banks were still burdened by what he describes as the “appalling service mentality” of state-imposed bureaucracy.
“I hate going to the bank,” says Lam, “and I think a lot of Vietnamese hate that experience too.
“That created an opportunity in Vietnam.”
‘Doi moi generation’
Lam was right. Timo has proved popular among Vietnam’s fast-emerging professional class, particularly freshly minted urban millennials. After an initial investment of “less than $1 million,” Lam says Timo has a notional valuation of $25 million.
Timo’s 250,000 customers mostly come from Vietnam’s so-called ‘doi moi generation’, the 20- to 30-somethings who were born after 1986, the year when Vietnam adopted the economic reforms that tilted it away from a Marxist command economy to the progressive embrace of the free market.
Akin to the perestroika reforms of Mikhail Gorbachev’s Soviet Union and China’s ‘open door’ policy of the late 1970s, doi moi means to exchange (doi) with an implication of innovation (moi meaning new).
The doi moi generation doesn’t bear the same wariness towards banks or technology as its parents and grandparents, who have endured war, endemic corruption, economic collapse, doctrinaire communism and bank nationalization.
In a Vietnam flooded by smartphones, its economy motoring along at 6.5% growth and eager to embrace digitization, Timo seems a business of the times.
Four years after launch, Timo’s Canadian chief executive Cameron Warden is reluctant to reveal how many times Timo’s app has been downloaded beyond “hundreds of thousands”.
But he has noticed other banks mimicking the Timo model, and besides, he says, “the business remains a work in progress. The deposits are in the hundreds of millions of dollars, so it is significant money. The competition is pretty fierce. Any bank doing digital banking is looking at our app and putting in swipes. Or trying to innovate for the sake of innovation.”
On top of that, he says, “philosophically they don’t understand where we’re coming from as a company. They can’t wrap their head around the fact that we’re transparent and the customer’s first and we can make money.”
I told my board when we started Timo that I didn’t want anyone who had been a banker
– Don Lam, Timo
Warden, 42, is not a typical bank boss. With his prominent tattoos, linen shirt and sneakers, his personal style is more millennial than McKinsey, more hipster than Harvard Business School. His professional background is in advertising in Canada and making music in Los Angeles.
He has been in Vietnam for seven years and Timo’s chief executive since 2017 (he joined a year earlier as head of marketing).
Timo was Warden’s first job in banking.
Lam says: “I told my board when we started Timo that I didn’t want anyone who had been a banker. Cam’s that guy.”
Warden ruffled feathers when he took over as boss: “I brought in all new management, restructured everything. My senior staff wouldn’t let me drive my motorbike for about a month because some people were threatening to kill me. It was tough.”
He also had issues when visiting friends and family in Canada.
“I tell them I run a bank but nobody believes me,” he laughs.
It was only after his mother read his name in an article about Timo that she was convinced.
“I’m under no illusion that I could go run VPBank [Vietnam Prosperity Bank] or Standard Chartered,” Warden says.
So, is Timo making money?
“Yeah, we do,” says Warden. “And they (other banks) are like: ‘But you can make 10 times more money if you screw them over.’ They’re real short-sighted. The features that we have, they don’t understand the reason why we did it. With the hangout downstairs, I go down to my computer all the time, talk to customers.”
As with a café, Timo’s hangouts don’t break for lunch and stay open until 7:30 pm, three and a half hours after Vietnam’s other banks have shut.
Anecdotally, at least, there is enthusiasm for Timo. During 10 days in Vietnam in July meeting bankers, techies, investors and bureaucrats, Timo’s name came up virtually every time in discussion about what was hot in Vietnamese banking.
We’re a gritty team, and that’s where we do have attitude. Our director group is scrappy
– Cameron Warden
Asiamoney randomly asked smartphone-wielding doi moi locals in various Ho Chi Minh City cafés and noodle stalls to see who was using Timo and how.
Of the 25 or so spoken to, about 15 had the Timo app on their phone. Of those, about 10 users said they kept funds on deposit in an e-wallet that they used regularly: to pay bills, top up phones or at the bar café, or to send cash to friends and family.
Lam says Timo’s internal data shows 68% of those who have downloaded the Timo app are regular users.
“People use it now and they go: ‘Wow, it’s really convenient (and) fast. It feels secure’,” says Warden. “We have a lot of celebrities and singers and people that use it and they tell everybody to use it. It’s free influence. Half of our customers come through word of mouth, through referral.
“I think where we win is where we would almost be everybody’s secondary bank,” he adds. “Our customers don’t have time to stand in lines; they do everything on their phones.”
Warden has found that customers, upon being paid, transfer funds to Timo to use for day-to-day transactions.
“A lot of companies here dictate which bank your salary goes into,” he says. “You have no choice. But then they transfer funds to their Timo account”
Traffic through Timo’s branch in HCMC, one of four branches nationally that Timo prefers to call hangouts, might be another guide. In Asiamoney’s four visits to the HCMC hangout on Pasteur Street, one had to wait for one of the 30 or so seats to be vacated on three occasions, at random times of the day.
The only physical indication that Timo is about money is the co-branded Timo-VPBank ATM inside the hangout’s entrance. Timo doesn’t yet have a formal banking licence, but operates through a relationship with VPBank, which does have the official licence.
Visitors wanting to open an account meet with a Timo representative and with central bank-approved staffers, sometimes from VPBank, who get them set up within 10 minutes.
“We API [application programming interface] into their core banking system,” says Warden of Timo’s tie-up with VPBank. “If you think about it, we’re just a front-end layer of the core banking system, with a different customer experience and a different approach to market.”
The relationship seems genuinely one of convenience. Inquiries to VPBank about Timo were deflected back to Timo. Warden says VPBank gets an unspecified share of revenues for the use of its banking licence but has no day-to-day involvement in Timo’s management.
“They have zero equity in Timo,” he says. “They literally just provide the licence. It hasn’t been ideal, but I mean we’ve made it work. We’ve proved the model. They do want to keep working with us because they view it like they’re getting free customers that they wouldn’t get otherwise.”
People use us because they don’t like using legacy banks. It’s the banks who have to change
– Don Lam
So, is Timo an internet café, a bank, a fintech, a software utility or that respite from the heat that might prompt another TripAdvisor review?
It seems to be a little bit of each, which Warden says is all part of its appeal.
“Some people disagree,” Warden says. “They’ll say: ‘You’re not a bank, you’re a software company’ and we say… in the customer’s eyes, we are a bank. If your card got skimmed, for example, you would come here, and say: ‘Hey bank, my card got skimmed’. So the customer views us as a bank. Internally, we operate not so much a bank. We’re in the market to change banking for the customer.
“We use what VPBank has, what they offer, and we just deliver it in a different way,” he says. “In a customer-first way with transparency. If there’s a fee, we go: ‘Here it is.’
“You’re looking at a company that’s pushing banking forward. Whether the future is what this is or not, I don’t know. We fit into that puzzle somewhere. But people go ask me: ‘Who are your competitors?’ and I would say: ‘Well, traditional banks that are trying to convert into digital and wallets’.”
The bulk of Timo transactions are fee-free, its big selling point on launch. But things are changing and Warden says he’s going to have to introduce fees at some point.
“I think what we’ll end up doing is probably introducing tiered accounts, where some are fee-free and some are not. Depends what you want. We’re looking into stuff like that.”
Warden says there are no real bankers at Timo.
“The majority of the staff here do not come from a banking background. I come from advertising. But we’ve got hundreds of years of being banking customers and going: ‘That’s a pain point, that’s a pain point, that’s a pain point,’” pointing to the frustrations that can arise using conventional banks.
“No ties here,” he says. “Maybe in a press conference I’ll put a suit on.”
In March 2017, around the time Warden became Timo’s boss, he did put a tie on. Timo was signing a partnership deal with Montreal-based SunLife, the big Canadian insurer, to distribute insurance products through the Timo platform in Vietnam.
Two months earlier, SunLife had bought a 25% stake in Hong Kong-based Crescent Asia, the holding company of Timo’s operator Global Online Financial Solutions. Today, two of Timo’s four hangouts are operated in partnership with SunLife. The other two Timo hangouts in Hanoi and the HCMC head office are run separately.
What does the future hold for Timo? Does the VinaCapital team cash out and sell to a bank? Some analysts and rivals say Timo’s challenge is to move from being a utility, that everyone’s-secondary-bank position that’s used solely for on-the-spot convenience, to being closer to a traditional bank, with assets, a balance sheet, a fuller suite of products.
“What’s wrong with that?” says Lam, in response to claims Timo is more utility than bank. “People use us because they don’t like using legacy banks. It’s the banks who have to change.”
Warden agrees: “We’re a gritty team, and that’s where we do have attitude. Our director group is scrappy, and we’ve had to fight with the bank and the government to try to change things. What we may end up doing is I may step into a different position and we get a more ‘bank-y’ CEO.”
Though Timo seems to be a winner for Lam so far, he says he has no intention of selling. He’s had offers to sell, he says, which he’s turned down. He believes the Timo model is exportable, and is eyeing the Philippines and Indonesia for Timo’s initial forays abroad, with western markets also on the horizon. “We are the antidote to bad, boring banking,” says Lam. “I really believe that.”
By Eric Ellis @ Euromoney