The 'world’s best digital bank' is future proofing itself by becoming even more digital

The new brand positioning aims is expected to cost the bank in the region of up to SG$30 million as it spreads the word throughout Asia with native and branded content through the form of videos and campaigns.

The bank, which was awarded the ‘Best Digital Bank in the World’ in 2016 by Euromoney, wants the new brand positioning to show it is committed to working ‘doubly hard’ to enable its customers to experience ‘simple, seamless and invisible’ with digital banking, Karen Ngui, head of group strategic marketing and communications at DBS Bank tells The Drum.

She also claims that the bank is firmly entrenched in the three key Asian axes of growth like Greater China, Southeast Asia and South Asia as in all the six markets that it has a strong presence and saw some franchise-enhancing developments.

“For example, DBS is a big player in developed markets like Singapore and Hong Kong, and we continued to lead the industry. In growth markets like India and Indonesia, digital has allowed us to scale into new segments without the need for a large brick and mortar network,” Ngui explains.

Pointing out that having acquired Australia’s fourth largest bank ANZ’s retail and wealth franchise across five markets in Singapore, Hong Kong, China, Indonesia and Taiwan in early 2018, Ngui says this has allowed DBS to launched its digibank product in India and Indonesia, where she claims the bank has since acquired more than 1.8m digibank customers in India and over 110,000 digibank customers in Indonesia.

“Prospective customers need to have a smartphone to enroll for digibank, so they tend to be the digitally-savvy mass affluent. The attractiveness of digibank to them is that digibank is a complete bank in a phone and branchless, paperless and signatureless. It is intended to offer hassle-free banking, which is what ‘Live more, Bank less’ is about,” she adds.

‘Digital to the core’

Being a digital bank does not end after offering hassle-free banking to its customers, says Ngui, as she is keen to stress DBS is keen to be ‘digital to the core’, which means investing in people and skills differently, re-architect the bank’s technology infrastructure in the back end to be cloud-native, have systems and ways of working that shorten the release times of new applications, and enable scalability through ecosystem partnerships.

“To become more customer-centric, we have continued to embed ourselves in the customer’s journey. In so doing, we have overturned our approach to customer service by starting from their perspective, rather than the logic and limitations imposed by our systems and processes,” she adds.

How DBS measures the success of its digital transformation

While Ngui acknowledges that every bank is undergoing digital transformation, she argues that even though banks often tout operating metrics to demonstrate the progress of their digitalisation efforts, the impact on earnings is unclear.

To this end, she claims that DBS is the first bank to have developed a methodology, which has been tested over three years, to measure the financial impact of digitalisation and intends to provide updates to the financial data annually.

According to Ngui, digital customers made up 42% of DBS total base in 2017, but contributed 63% of income and 72% of profit before allowances. Since 2015, income from these customers has also grown at a compounded annual growth rate of 27%, compared to a 4% decline for traditional ones. Digital customers also gave the bank a return on equity (ROE) of 27% in 2017, 9% ahead of the traditional segment.

“Our profit and loss measurement is for the consumer and SME businesses in Singapore and Hong Kong, where the impact of digitalisation is most clearly visible. The businesses currently account for 44% of the group and could rise to half in five years,” she says.

“Customers in these businesses are delineated into two segments, digital and traditional, based on how they interact with us. Digital customers are those who have used digital channels to either purchase a product or upgrade to a higher customer segment; or carry out more than half of their financial transactions; or carry out more than half of non-financial transactions over a 12-month period. Those that do not continue to do so revert to being classified as traditional.”

This shows that DBS has ‘superior financial metrics of digitalisation’, says Ngui, as the costs of acquiring and serving customers are lower each time digital channels are used. As customers increasingly adopt digital behaviours, DBS is also able to reduce reliance on physical infrastructure such as branches to support customers, which will enable the bank to optimise enterprise costs over time. This means that more of the income earned from customers contributes directly to the bottom line.

Digital consumer and SME customers also bring twice as much income per head than their traditional peers as digitalisation improves customer engagement, translating into a higher share of wallet, Ngui adds.

“We also found that when traditional customers adopted digital behaviours, they would become more engaged and transact more with us. This provided corroborating evidence that digitalisation increases the stickiness of customer relationships. In 2017, the income we earned from digital customers and from traditional customers who adopted digital behaviours grew more quickly than the average of the total customer base. By contrast, income growth from customers that stayed traditional was below the average,” she explains.

DBS’ business plans moving forward includes initiatives to encourage customers to adopt digital behaviours as the growing size of such customers will drive shareholder value creation, says Ngui. “Over time, we expect the proportion of digital customers to increase from the current 42% to 50-60%. This will lead to further improvements in the cost-income ratio, which we expect to decline to below 40%. Over time, the cost-income ratio will become a more significant driver of ROE.”