DBS: Leading from the front

It is commonplace to hear bank bosses talk about the power of digital banking. They pay lip service to financial technology, make frequent references to online banking or mobile apps and repeat stock phrases about disruption. 

But when most bankers get down to talking about the nitty-gritty of their businesses, digital banking still tends to be an afterthought.

Not so at DBS.

“Digital touches everything at DBS,” says Piyush Gupta, chief executive. “It’s our back office, it’s our engine, audit, HR, marketing, retail, the investment bank, markets, corporate banking, supply chain, transaction banking, cash management, everything.”

The Singaporean bank is the largest in southeast Asia, boasting S$551 billion ($396.2 billion) of assets, more than 10 million consumer banking customers and S$5.63 billion of profits at the end of 2018.

To illustrate quite how big DBS is compared to its regional rivals, consider the Philippines. According to the figures for May from Bangko Sentral ng Pilipinas, the central bank, DBS could buy every bank in the country and not even double the size of its assets.

Most banks in its position would use the familiar playbook of incumbents, taking a slow and steady approach to protect market share and price the competition out of the market. But DBS has acted more like an upstart, becoming what David Gledhill, the recently retired chief technology officer, called a “22,000 person start-up”.

The bank has not relied entirely on technology to grow. In 2016, it spotted an opportunity to boost its private banking arm, paying S$110 million for the Asian retail assets of ANZ, a small player in Asia’s wealth management business. The consolidated private bank made S$162 million in 2018, easily covering the cost of the purchase. Gupta calls it the best deal he’s ever done.

But even the bank’s approach to acquisitions has been impacted by its tech shift: everything now is seen with a digital lens. Gupta says further acquisitions are unlikely, but he won’t rule them out. “We’ve found that if we can get a decent business with existing customers and put a digital layer on top of it, we can grow our business rapidly,” he says.

Is there a risk that digital solutions become a square peg that DBS attempts to fit into a series of round holes? Will digital banking become the obvious answer instead of the right answer? Some bankers interviewed by Asiamoney said they were sceptical about the impact of digital on the wider banking business. But those banks are, admittedly, not quite DBS.

“We’ve had more traction with our digital transformation across the board than most companies have,” says Gupta. “We’ve also been measuring the impact of that transformation on shareholder value, so we have a better line of sight in terms of how it impacts return on equity. It’s very broad-based.”

This total approach to digital banking allows DBS to treat it as the right solution to a series of different problems. Digital is less a peg and more a putty, changing form to fit into a series of holes, offering different solutions to different challenges. In large markets with plenty of competition at the branch level, such as China or Indonesia, it is the obvious entry point; in mature markets such as Hong Kong, Singapore or Taiwan, it allows chances for rapid growth that exceed the industry average.

“We’re finding that even in mature markets, if you can do the digital transformation well you can actually build not only from a defensive standpoint; you can grow market share,” says Gupta.

All this might provoke an obvious question from the attentive reader. Why has DBS been picked by Asiamoney for the global banking category, rather than being included as a ‘digital bank to watch’? The reason is that DBS has been so thorough in making digital a part of its business model, and has integrated technology into every process so neatly, that it has set a template for banks across the world to follow.

DBS itself does not want to be a global bank. Gupta acknowledges that southeast Asia is not big enough to contain the bank’s ambitions but says being a pan-Asian bank is ambition enough. But whether DBS sees its own opportunities as being in Asia or not, its very approach to banking will reveal opportunities to rivals in Europe, the United States and elsewhere. It may not be a global bank; it is certainly a global influence.

As one bank chief executive said to Asiamoney: “We are learning from DBS”. 

There is no better endorsement than that.