Embracing the Trend of Banking Digitalization

To stay on top of the era of digitalization, DBS Bank has transformed itself into a digital bank and stayed competitive with technology giants

By Fang Ying, Senior Writer, China Business Knowledge @ CUHK

“With increasingly tech-savvy customers and rising smartphone usage, digitalization is one of the macro-trends in banking industry, and DBS Bank is at the forefront of this trend,” said Mr. Sebastian Paredes, Chief Executive Officer of DBS Bank (Hong Kong) Limited on the Global Business Forum organized by The Chinese University of Hong Kong (CUHK) Business School’s Global Business Programs in February 2017.

With the theme of “Navigating through the Years of Turbulence”, Mr. Paredes shared with the audience the major macro-trends in the banking industry in recent years and how DBS gets through these challenges through digitalization and creates new business opportunities.

Mr. Paredes said that digitalization has brought DBS a lot of new business opportunities. Headquartered and listed in Singapore, the Bank was ranked as the 44th- largest bank in the world in 2014, according to Mr. Paredes. In July 2016, the Bank was named as the World’s Best Digital Bank at Euromoney Awards for Excellence, which is recognized as the benchmark for leading firms in financial services.

“The whole company, from top management to individual employees, we are all committed to embracing the digital trend,” he remarked.

DBS started its digital business strategy and launched its digital bank platform five years ago, now over 40 percent of its new customers are from the digital platform. In April 2016, DBS launched a “mobile-only” bank in India, which is branchless, paperless and signatureless, leveraging a combination of groundbreaking technology such as biometrics and artificial intelligence to revolutionize the overall customer experience.

“With increasingly tech-savvy customers and rising smartphone usage, digitalization is one of the macro-trends in banking industry.” – Mr. Sebastian Paredes, CEO, DBS Bank (Hong Kong)

In its other markets, DBS Bank’s retail, wealth and corporate customers are also increasingly engaging with the bank digitally. In 2015, 16 percent of DBS’ new wealth customers opened accounts with the bank digitally. 51 percent of SME customers in Singapore did the same through DBS’ Online Account Opening Service. In 2016, over 90 percent of the bank’s remittances are also done by customers digitally using DBS Remit, according to the data from DBS.

Mr. Paredes pointed out that the digitalization has come to the banking industry quite late, and for DBS Bank, in terms of digital banking, their competitors are not traditional banks, but Fintech companies.

“Our digital banking business has been growing really fast in the past 12 months. When we talked about the competition with our counterparts, actually we are talking about those technology companies, such as Alipay, ApplePay and Tencent,” Mr. Paredes said.

He said that both traditional banks and technology companies have their own strengths and weaknesses in digital finance service industry. Comparing to banks, Fintech companies have advanced technology infrastructures, which are the important cutting edges of these companies. However, traditional banks have strict and sound regulations to better protect customers’ interest, which the Fintech companies are lacking of.

“Traditional banks still have their advantages. For example, for safety reasons, you may not want to put one million dollars into a digital bank. Customers would still use traditional banks for their large capital needs,” Mr. Paredes said, “So I believe that our more regulated platform brings us the strength and this would distinguish us from those big nonbank technology companies.”

He believes that the future will be digital and a highly regulated environment will help banks win the digitalization battle in the financial service industry.

“I believe that DBS will be one of the few banks that win the competition with these nonbank technology companies,” remarked Mr. Paredes. “We have demonstrated that we actually can think digitally like the technology companies and leverage the technologies they created for the benefits of the banks.”

Nevertheless, Mr. Paredes emphasized that technology companies are playing a major role in changing the banking industry and bringing transaction banking to a new age. So in blue ocean markets, like India or other countries, there will be more collaboration between banks and technology firms.

He said that companies like Alipay and Tencent have dominant digital payment platforms in China, but in other markets, DBS Bank may become their partners.

“These companies are quite successful in the China’s market, but as they begin their internationalization journeys, they may need international partners, such as DBS Bank,” he said. “It’s not easy for a Chinese company to create an eco-system in the US or India markets. But in India, we have already created a world-first fully digital bank. We have gotten over one million customers on our digital platform in short period of four months, which is unexpected before,” he added.

“I don’t think it’s an either-or question. We will have more collaboration in international markets. So in the future, it will be about partnership and participation in the same digital eco-system. That’s the mentality of the future,” he commented.

“We are highly committed to create a digital banking eco-system, keeping DBS at the forefront of shaping transaction banking in the region,” Mr. Paredes said, “I believe we will be the largest digital bank in the world.”