DBS Banks Digital Transformation Strategy

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Introduction

DBS, Asias largest bank, was failing due to several factors; however, top on the list was how the bank was slow. The bank had gained a bad reputation in public, and thus, the introduction of new management changed everything. The management started digitizing the bank and changing its operations while keeping an eye on threats from digital disruptions. The bank has overturned its bad reputation and is now one of the best banks to use in Asia. This study will analyze the strategies used and their effectiveness in digitizing the bank.

The Strategic Considerations That Motivated the Urgent and Aggressive Digital Transformation Initiatives in DBS

One of the disruptive threats that pushed DBS into a digital transformation was the many fintech start-ups that had started to sprout in the market. These digital markets were providing a wide range of innovative financial services and products which were outshining the traditional banking systems. In this case, DBS faced a challenge from the Chinese e-commerce giant, Alibaba, which was getting to any space it would find in the market. The company had acquired a large stake in the Singaporean-based company Lazada, a major player in the South Asian market (Kien, Weill, and Xu, 2019, p. 4). These Fintech companies had formed a significant competition for the banking system by coming up with their debit and credit cards. As a result, this competition saw a decline in the number of people doing traditional banking services.

The other reason was that DBS was experiencing institutional constraints for acquisition-led and organic expansion in the region. DBS could not acquire an Indian-based bank which led them to think of alternative methods of scaling their presence in the one billion markets (Kien, Soh, and Weill, 2016, p. 108). The only option which was available to them was through the use of digital transformation. Thus, they had to create a digital bank because it would reach more people and was flexible to the market. This method allowed them to penetrate the market successfully.

The Asian market was changing at a first speed and adopting digital technology. Unlike what most banking companies thought that many wealthy people did not like technology-based banking services, they were adopting digital systems for banking and saving their wealth. According to Ms. Tan Su San, most people bypass traditional wealth management systems and opt for digital wealth management platforms (Kien, Soh, and Weill, 2016, p. 109). Hence the demand for digital services was increasing all over Asia, and there was a need for DBS to change too. In 2014, there were already 700 million digital users, and the number was expected to rise to 1.7 billion by 2020 (Kien, Soh, and Weill, 2016, p. 109). In addition, the most mobile-centric young generation was adopting smartphones, which presented a need to change how business was done. There was a need to accommodate the new customer demands which had come with the digitalization of the consumers. Hence the most suitable solution to the digitalization of the Asian market was the digitalization of the banking systems.

The final reason is that DBS wanted to complete the GANDALF transformation, which had seen major companies benefit from transforming to the digital market. The GANDALF model spells out some of the most successful tech giants, which include Google, Amazon, Netflix, Apple, LinkedIn, and Facebook (Kien, Weill and Xu, 2019, p. 4). The missing letter in this model was the D, representing the DNS. This model helped the employees to change their mindset and start thinking that reforms were possible for the company. DBS set aside $600 million annually for digital transformation, which would help the company achieve its goals (Schneider and Kokshagina, 2021, p. 16). Thus, its urge to become a tech giant was why the company decided to digitalize its services.

The Main Strategies of DBS In Relation to Customer Experiences, Operations, and New Business Models

In addressing customer experiences, DBS adopted various strategies which helped them to give their customers a whole new range of experiences. One of the most impactful strategies was using real-time data to make amendments instead of depending on opinions or intuitions (Theunis, 2021). An example of such an initiative was the monthly recording and analyzing transaction statistics of its call centers. Upon applying this strategy, they found that out of the 86,000 calls made per month, only 20,000 recordings were made on why the customers called (Kien, Soh, and Weill, 2016, p. 113). This strategy was truly transformational as customer needs were addressed from the root cause helping the company to save more time and giving customers better experiences. The model enabled the bank to adopt a preventive solution-based strategy rather than a curative one.

The adopted business operations demand a flexible and robust system that can be well integrated into the existing system. However, this company had to restructure its operations and merge them into one new Group Technology and Operations (Rao, 2021). It enabled employees to have a say in providing innovative opinions that would help the company. An example of the new flexible operations was when the company launched the operational Excellence project, which encouraged employees to provide their opinions to the company. The strategy helped to eliminate over 240 million hours of customer wait using the suggestions provided by the employees (Kien, Soh, and Weill, 2016, p. 113). One example of the fruits of this project was the introduction of an SMS queuing system which enabled the customers to book services in the bank and get the average wait time using their mobile devices. It helped customers to save time and only come to the bank when it was their turn to be served. This was a nice-to-have and fashionable initiative because it saved customers time, and being the only bank in the region to implement it made them feel proud.

New business models include the new plans that the company had adopted in the digital transformation, which helped them to meet their set goals. DBSs main model to ensure that its services were well integrated into the companys system was implementing the digital systems from its internal part (Spindel, 2020). The company took the first five years implementing internal services, which was essential in forming a base of the external models. That is why most digital systems did not fail like other competitors who implemented digital lipstick models, which was only based on the front-end system alone, such as having a fancy website (Gledhill and Vinayak, 2018). This business model was essential for strategic growth as it ensured that the digital services brought on board had significant back-end backup; hence they were not prone to fail. In addition, these models had been fully integrated into the system, making the companys growth in the digital market very easy because the foundation was already set. Having these systems from the back-end implies that they had considered customer requirements, had enough data backup and that the employees had been fully integrated into the system.

Examples of How DBS Manages Innovation Internally and Open Innovation across Partner Ecosystems

To ensure that DBS continues to grow and be in line with the latest digital transformation, it must keep a close eye on Fintechs, customer needs, and other industries. Thus, it has adopted various methods to internally manage the different stakeholders and ensure they have room in its digital space. For instance, DBS directly engages with fintech start-ups using internal accelerator programs (Cope et al., 2022). They have developed a program called Start-up Xchange, which helps build stronger fintech interactions. Before this program was adopted, DBS relied on third-party vendors to help negotiate, resulting in a longer lead time in processing the legal procurement processes (Dumra, 2020). Thus, Start-up Xchange was started to eliminate supplier-customer arrangements with a more nimble and collaborative approach. This program helps to provide the bank with start-ups that can create solutions to its business problems. This program enables the start-ups to co-create and commercialize projects with DBS.

Customers and other industries are other important inputs in DBSs success and digital transformation. Thus, the company had to look for a way to include their innovations in its system. There is an increasing demand for end-to-end user services within the market, regardless of whether the company should consider and control various factors (Cope et al., 2022). DBS has realized this need and come up with a bottom-up model whereby they start their strategies from a customer perspective helping the company to focus on the consumer. DBS launched the worlds largest API in 2017, which enables partners and customers to provide better business solutions. By 2020, it had over 400 partners in the system who not only give business solutions but help drive sustainability too (Dumra, 2020). This model has enabled the company to interact with external partners, build and validate quality technologies helpful to the bank before formally reaching the bank.

Key Lessons That Other Incumbent Banks Can Learn From DBS and The Challenges They Expect To Meet

As banks face intense pressure from new financial service providers, they should note that they have a competitive edge due to their accumulated resources. While it is not advisable to exactly copy DBSs transformation blueprint, there are a few things that they can adopt from it. One of the main lessons that they can pick from DBSs case is that for them to succeed, they need to disrupt the disruptors (Bhapkar et al., 2021). The digital banking system is becoming competitive as different countries lower barriers for digital companies. The only way that banks can counter this competition is by disrupting the disruptors using their competitive edge. Banks have a wide pool of resources, capital, and expertise, which gives them the potential to challenge new entrants (Bhapkar et al., 2021). Since some banks, such as DBS, have already taken the challenge and proved it could work, more banks need to heed up to the challenge.

However, in adopting this strategy, banks are expected to meet various challenges, such as customer shift into digital services. The banking services must ensure that they market their digital transformations adequately to consumers. In addition, some of the fintech, such as Paypal, are already beyond the point where they can be stopped, and thus, opening parallel services may not be able to disrupt them (Bhapkar et al., 2021). The most effective strategy to deal with these types of services is to integrate them into their systems and ensure they control them. Otherwise, this fintech will come to control the banks later.

The other lesson incumbent banks can learn is that a new business building is the most effective way to grow in the new market. As competitors provide low-interest rates and tougher banking regulations are implemented in different countries, banks only option is to expand into new markets. They can use mainly digital transformation, large-scale mergers and acquisitions, and new business building (Cope et al., 2022). Mergers and acquisitions provide speedy access to new markets but at a high price. This shows that building a new digital business is the only viable option for banks because the ability to launch new business models has been as easy as never before. Thus banks should seek to come up with stand-alone businesses, such as the stand-alone vehicle business, which allows them to extend their product offerings. The main challenge they may meet in offering these services is competition from fintech and other players who specialize in them.

Conclusion

DBS Bank has shown that strategizing is important for any business to win the market successfully. The bank took less than a decade to change its reputation by employing new strategies which enabled it to beat completion in the market. Since technological advancement is an investable fact in the fast-evolving world, banks and other enterprises should seek to digitalize their services to disrupt the disruptors; otherwise, their market share shall be taken.

Reference List

Bhapkar, R., Segev, I., Smith, C., and Townsend, Z. (2021). Building a digital bank: How incumbent banks can disrupt the disruptors | McKinsey. [online] www.mckinsey.com. Web.

Cope, R., Gill, C., Liu, J. and Pakhawala, M. (2022). Becoming more than a bank: Digital transformation at DBS | McKinsey & Company. [online] www.mckinsey.com. Web.

Dumra, B. (2020). Transforming DBS bank into a tech company. [online] Qorus Banking Innovation. Web.

Gledhill, D. and Vinayak, H. (2018). Transforming a bank by becoming digital to the core. [online] McKinsey & Company. Web.

Kien, S., Weill, P. and Xu, M. (2019). DBS: From the Worlds Best Bank to building the future ready entreprise. MIT Sloan School of Management, pp.120.

Kien, S.S., Soh, C., and Weill, P. (2016). How DBS bank pursued a digital business strategy. MIS Q. Executive, 15.

Rao, V. (2021). How DBS became the Worlds Best Bank. [online] INSEAD Knowledge. Web.

Schneider, S. and Kokshagina, O. (2021). Digital transformation: What we have learned (thus far) and what is next. Creativity and Innovation Management, 13(2), pp.120.

Spindel, D.K., and B. (2020). Redefining performance management at DBS Bank. [online] MIT Sloan Management Review. Web.

Theunis, E. (2021). Evy Theunis of DBS: Consumer digital banking strategies. Bloomberg Professional Services. [online] Web.

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