The Singapore-headquartered bank started its data-led change plan in 2013, as a result of the impact caused by Chinese companies like Alibaba and WeChat, according to the bank's Chief Analytics Officer (CAO) Sameer Gupta :
The banking industry was facing severe disruption in Asia. Companies like Alibaba were awarding 10 million loans in one day without even being a bank, so they were really eating our lunch and we needed to react.
As well as competition from new market entrants, the digital transformation at DBS, who also has operations in other Asian markets including Indonesia, Hong Kong, Taiwan and China, was prompted by a need to improve cost efficiency:
While startups began to unbundle banking and cause huge disruption, it became increasingly clear that branches are very costly and don't allow scale, nowhere near what a digital bank does. So it was a pivotal moment for us to not only survive, but thrive and be focused.
Getting to know customers
DBS has been doing a lot of ethnographic studies with the aim of "getting under the skin of the customer", as Gupta puts it, and providing relevant offerings by using data analytics under the change program, dubbed DATA First.
Under the program, the bank employed full-time ethnographers as part of its design teams. As part of DBS’ customer journey design activities, the professionals engage both in detailed customer interviews as well as in educating employees on how to do proper qualitative research - this, according to Gupta, goes hand in hand with quantitative methods, in a "hybrid insight" approach:
The data can, for instance, inform the qualitative research about extreme users or customer issues that need to be addressed. These are crucial insights to inform the ethnographers’ research plan.
Another consideration of the data-led change plan at DBS was to go beyond the end goal of the customer purchase and related bureaucracy in areas such as approvals, which, according to Gupta is "just a small part of the process". He adds:
You need to consider your customer is trying to find the perfect home, with schools and certain amenities nearby, it is an emotional discussion. So we thought about how to engage with customers and help them in the decision making process.
To illustrate his point, Gupta cites the Home Connect app, a free home mortgage application aimed at helping buyers make sense of the property market, with calculation of mortgage payments and check information on past transactions for similar properties.
Gupta says DBS's market share on mortgage lending was 24% prior to Home Connect's launch in 2013. Today, it is 32% - and the executive believes that data-based innovations such as the app play a significant role in improving business results:
We needed to ensure we were getting to know our customers better and ensuring that what we communicate to them is relevant. Customers have given us feedback and said they wanted [sales calls] to stop, so we focused on changing from a sales mindset to actually helping them in their decisions.
In order to move away from the sales-focused approach and actually helping customers, Gupta says DBS analysed transaction failures and customer centre interactions and used “complex event processing” to reach out to its customers in issues such as customers trying to make payments with an inactive credit card. He adds:
Through our focus on customer journeys, we are continuously looking at reducing friction points.
Another example of customer-facing improvements driven by data is the ability to prevent ATMs running out of cash. To improve how it detects these occurrences across a network that processes about 20,000 transactions per machine per month, DBS started reviewing data on transaction patterns and peak periods to predict transaction volumes and optimize ATM reload schedules. In addition, all ATM reloads are done in the nighttime, which dramatically reduced cash outs. Gupta says:
Prior to this initiative, the average time between cash-outs per machine was three months and that was a major source of customer complaints. Currently, the average time between cash-outs per machine is 55 years.
A core transformation with the introduction of cloud and microservices was also required in order to enable the introduction of mobile banking. The back-end changes are part of an ongoing process and Gupta said DBS is increasing in-house development to enable it to sustain its digital delivery.
Being able to support new products and services became even more urgent after the bank launched its mobile bank offering Digibank in Indonesia last year as well as a series of other services. This includes last year's launch in Singapore of SmartBuddy, an application running on smartwatches to teach digital money management to students. Gupta says:
This is about re-doing everything we have - many banks focus on creating a gimmicky front-end and in the back-end you have the equivalent of having a person sitting behind an ATM feeding cash to the machine.
The bank is also heavily investing in its API platform, which currently has over 150 services ranging from account-related services such as deposits, loans and investments to such as FX rates, payments, transfers and transaction analytics. Gupta adds:
We have nearly 50 partners on board in what is one of the largest transformations in the world and they will help us create our own version of the WeChats and Ali Babas of this world.
Going forward, DBS will look into improving its data analytics set up to enhance areas like robotic process automation - 8 percent of customer interactions are handled by bots - and other more advanced applications such as anti money laundering: ït's still early days but we will be enhancing analytics to drive a lot more productivity and more added-value services and processes to the bank.
The digital transformation at the Asian banking giant required a cultural change as well as a shift in the bank's approach to risk. Gupta says:
Banks are not in the business of taking risks - typically is is not a problem to experiment as long as the experiment is successful, so no innovation is allowed.
As well as changing the working environment for the analytics team to resemble that of a startup, Gupta says DBS created a series of hackathons and events to engage with the startup community as well as innovation labs to instill a new culture within the bank.
According to the executive, some 14,800 out of the 22,000 staff at DBS have so far been engaged in some kind of activity related to the transformation process. The intention is that the number will increase as the value of data becomes even more pervasive across the organisation.
So much has already been said about the threat of platform giants spreading their tentacles into the distribution and manufacturing aspects of banking - that has been gaining more momentum in Europe and the US of late but Asian organizations have been witnessing it first hand for some time. DBS Bank's story of data-led transformation to fend off these threats dates back to 2013 and is illustrative of that fact.
Gupta insists on the point of using information to "help customers" - that is understandable since one of the few differentiating factors for banks at present is consumer trust. Since access to valuable customer data is no longer exclusive, banks should take a leaf out of DBS's book and find effective ways to use information to take advantage of the reputation and mindshare that they still have.