Embracing the Trend of Banking Digitalization

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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.

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.”

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13 COMMENTS

Hong HUANG
6/25/2017 7:00:37 PM
Information is paramount factor to the success of any forms of financing. Chinese fintech companies may face challenges abroad because digitalization facilitates finance to individuals, who compared with institutions, have even more variations.
Hong HUANG
6/25/2017 6:55:59 PM
Regulations typically lag technological developments. But burdensome regulations can also be detrimental to technological developments. So maybe we should first listen to the response from the market to digitalization before promulgating regulations.
Hong HUANG
6/25/2017 6:50:10 PM
Digitalization has potential to reduce labor costs and speed up the working process. And more importantly, it is environmentally friendly since it saves papers.
Ran AN
6/3/2017 10:59:22 AM
I am wondering when the whole banking industry is digitalized, will unemployment rate increase for the industry because many manual services are not needed again?
Ran AN
6/3/2017 10:54:53 AM
When we embrace the digitalization era with enthusiasm, we should be also aware of its risk and disadvantages, such as information security issues.
Ran AN
6/3/2017 10:52:22 AM
The digitalization of banking driven by modern technology, in some sense, widens the gap between different social group and strengthen inequality.
Ran AN
6/3/2017 10:51:12 AM
Though digitalization of banking services brings convenience to general public, it also brings difficulties to many elders who are not familiar with or difficult to use digital services.
K. Si
5/23/2017 5:01:09 PM
In contrast, I found that the use of digital banking is particularly low in Hong Kong. I think that further development of local digital banking is helpful for tourism.
K. Si
5/23/2017 4:59:18 PM
It is interesting to observe that mainland China is maybe the place in which digital banking is most commonly adopted. I guess it may be a valuable research question as to study what factors foster the quick rise of digital banking in China.
K. Si
5/23/2017 4:56:38 PM
Digital banking indeed makes our life more convenient. It is becoming increasingly more prevalent and it surely is a challenge for all banks.
Jo
5/21/2017 5:18:05 PM
Both the personal bank business and corporate business are shaped by the digitalization of bank industry. This trend greatly increases the efficiency for both business and daily life.
Jo
5/21/2017 5:14:38 PM
The widespread use of smart phone shapes the world tremendously, changing business and individual life style. I can't imagine that the widely adoption of smart phone is less than 10 years.
Jo
5/21/2017 5:12:13 PM
The digitalization of bank industry in mainland China shows the advantage of follower. The traditional financial intermediates are forced to digitalize by the internet technology companies.
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