Why did Singapore DBS Bank's digital banking transformation succeed?

Have you ever heard of "DBS Bank" in Singapore?

DBS Bank is now attracting worldwide attention for being one of the world's best examples of a successful "digital bank".

The fact that it was named World's Best Digital bank by Euromoney, a financial information magazine, twice in 2016 and 2018, is proof of its ability.

In this article, I will draw on the content of the book "The Birth of Amazon Bank: The Next Generation Financial Scenario in 2025" to address the question of why DBS Bank's digital banking has been so successful.

What is DBS Bank in Singapore?

Let's start by explaining what kind of bank DBS Bank is.

DBS Bank was established in 1968 as "The Development Bank of Singapore", shortly after its independence from the United Kingdom in 1963 and Malaysia in 1965.

In 2003, the bank changed its name to DBS Bank, which comes from the initials of its original name.

DBS Bank, which started in Singapore, now has more than 280 offices in 18 countries and regions, mainly in Southeast Asia and East Asia.

With a market capitalization of 7 trillion yen, it has surpassed Sumitomo Mitsui Banking Corporation and Mizuho Bank in terms of market capitalization compared to Japanese megabanks, and has grown to a size that is close to that of Mitsubishi UFJ Bank.

One of the reasons why DBS Bank has attracted so much global attention is that Euromoney, a financial information magazine, awarded it the title of "World's Best Digital Bank" for two years in 2016 and 2018.

It was also the first Asian bank to be awarded "Best Bank in the World" in Global Finance magazine's "World's Best Banks 2018".

So what is it about DBS Bank that makes it so valuable?

Why DBS Bank is valued

Because "it doesn't just talk about digital strategy, it quantifies what digitalization means for profitability.

Quite simply, this is why DBS Bank is so well regarded.

According to the specific figures, the digitalization has resulted in the following results.

• Customers who do digital transactions bring in twice as many sales and hold more loans and deposits than customers who visit stores.
• The cost of acquiring a customer for a digital transaction is 57% lower than the cost of acquiring a traditional customer.
• Digital trading customers are 16 times more likely to voluntarily trade than their traditional counterparts
• 19% ROE from traditional customer transactions, compared to 27% from digital customer transactions
• 39% of overall digital trades make 69% of overall profits (2017)

There are many banks that have demonstrated their digitalization policies and are taking action, but the only one that has achieved such numerical results is probably DBS Bank.

DBS Bank's digital banking strategy

How has DBS Bank's digital banking been accomplished?

DBS began its digital transformation of the bank in 2009. It was ten years ago now.

The digital transformation began under the leadership of CEO Gupta, who joined the company in 2009, and CIO David Gledhill, who joined the company in 2008.

The three mottoes of DBS Bank's DX

Mr. Gupta's CEO set forth the following three slogans to literally deny the business of the past and rebuild it into a new company.

• Become digital to the core.
• Embed ourselves in the customer journey.
• Create a 22,000 start-up.Transform 22,000 employees into a start-up

The first, "Become digital to the core." is about digitizing everything from the surface to the middleware, hardware, and infrastructure levels, as well as the mindset of management and employees.

The second one, "Embed ourselves in the customer journey," represents a shift from a "bank-focused transaction journey of deposits, loans, and currency exchange" to a "customer-focused customer journey that meets the lifestyle and needs of each user.

The third one, "Create a 22,000 start-up.", relates to the first point, which is the need to transform the mindset of employees in a start-up way. Specifically, the company aimed to cultivate a new mindset through internal hackathons and investments in startups.

Under these three slogans, DBS Bank proceeded to transform itself into a digital bank in "two phases".

DBS Bank's digital banking transformation 'in two phases'

Phase One: Time to lay the groundwork for building a digital bank

The first phase was 2009-2014. It's time to lay the groundwork for building a digital bank.

The first step was to build the infrastructure, platform, and development structure to become a digital bank.

Specifically, the company built a development infrastructure that included an additional data center, a security operations center, and a monitoring center.

In addition, in order to create a highly flexible development system, the company sought to "move away from outsourcing" in development. As a result, 85% of the company's products are now made in-house. That's why it's also called a technology company.

Phase 2: Time to build a company-wide digital bank

The second phase will be after 2014. It's time to build a digital bank across the board.

The company underwent an organizational change from a "project-based organization" to a "platform-based organization" and the formation of an agile development team.

Within this second phase, the following "four goals" have been identified as the pillars of digital transformation.

• Go cloud-native.
• Boosting Ecosystem Performance with APIs
• Putting the customer first
• Invest in people and skills.

The first point, "Going cloud-native," cut more than 80% of the labor costs for hardware, software, and management departments, and went cloud to the core.

The second point, "Improving Ecosystem Performance through APIs," has resulted in building an ecosystem with more than 60 partners through more than 200 APIs. This has enabled them to work with a variety of partners to improve the customer experience.

In the third point, the company's commitment to putting the customer first, the company made efforts to digitize customer contact points and opened retail banking accounts online, making it "natural" from the customer's perspective.

The fourth point, "Investing in people and skills," set forth five guidelines: "thorough customer-first thinking," "data-driven," "risk-taking and experimentation," "agile," and "becoming a learning organization." To achieve this, the company established learning spaces and collaboration spaces with startups.

A new mission called "Live more, Bank less"

DBS Bank has a new mission of "Live more, Bank less" for 2018.

The Japanese translation would be something like "Let's enjoy life more without being aware of the bank". Where the bank says "Bank less," one feels an uncommon sense of courage, determination and confidence.

DBS Bank, as an "invisible bank," aims to create a world where people can use financial services more naturally through a variety of services, which is the idea of BaaS (Bank-as-a-Service).

Why has DBS Bank's digital banking been so successful?

There are no other banks in the world that have become digital banks, so what has made DBS Bank's digital banking so successful?

Mr. Gupta, CEO, said.

If we don't digitize ourselves, we're going to die.

DBS Bank sees China as one of its main battlegrounds, and was quick to sense the danger of financial disruptors such as Alibaba and Tencent making strides.

The primary reason for the company's success was the fact that in 2009 the company was able to embark on a company-wide reform with such a sense of crisis.

Mr. Gupta urges that "the best way to confront disruption is to destroy yourself first. This kind of executive leadership is essential.

In addition, I personally believe that the first phase of the DX process, in which the company laid the groundwork for in-house development, and the second phase, in which it invested in people and skills, was a major factor in the creation of DBS Bank as a technology company, rather than a conventional bank.

Because we develop our own products, we are able to improve our products in a fast cycle, and the reason why we are able to do that is because we have the right people with the right skills and mindset.

What would you do if you were Jeff Bezos?

If Amazon's Jeff Bezos were to do banking, what would he do?

According to Gledhill, CIO of DBS Bank, the three aforementioned slogans were born out of this thinking.

Thinking thoroughly from the perspective of the destroyer may be an effective way to free yourself from unconscious bonds within your company and think thoroughly.