Korean banks urged to 're-imagine banking'

Korean banks need to cope with the rapidly changing business circumstances through two major tasks — globalization and digitization. Seen are headquarters of Korea’s major banks. / Korea Times

DBS CEO says digitalization will be game changer

By Kim Jae-kyoung

SINGAPORE ― For Korean banks, there are two key urgent issues to address for sustainable growth ― globalization and digitalization.

Over the past few years, Korean lenders have been striving to expand their global presence and to develop digital strategies but their efforts came to little fruition and they are still lagging behind global leaders.

The Development Bank of Singapore (DBS), considered a leading Asian bank both in globalization and digitalization, is a good example that shows how Korean players must reinvent themselves to become a leading player.

In an interview with The Korea Times, DBS CEO Piyush Gupta cited five key success factors that have set DBS apart from other lenders in Asia ― innovation, Asian focus, disciplined execution, a clear strategy and an engaged workforce.

He said that banks should be well aware of how technology disruption is reshaping the banking industry, while developing new strategies to stay competitive against new competitors equipped with innovations in digital payment and data.

“Banking is being disrupted by technology and to stay relevant, banks like ourselves need to re-imagine banking, and make it simpler, easier and smarter for customers,” he said.

“By focusing on the innovation and customer agenda, we’ve been able to improve customer satisfaction and gain market share.”

Gupta, who served as Citigroup’s CEO for Southeast Asia, Australia and New Zealand prior to joining DBS, said that its strong focus on Asia in globalization has made DBS more competitive and adaptive to new changes.

“Our regional expansion, through both organic and inorganic growth, stems from the belief that it is possible to have an Asian niche, and to occupy the sweet spot between a local and global bank,” he said.

“At the same time, we benefit from the fact that despite our growth, we are what I call a Goldilocks size ― small enough to be nimble, big enough to matter,” he added. “This has allowed us to move quickly to capitalize on business opportunities as they arise.”

DBS acquired Dao Heng Bank in Hong Kong in 2001, the “good bank” assets of Bowa Bank in Taiwan in 2008, and more recently, the private banking assets of SocGen in Singapore and Hong Kong.

The veteran banker said that it is important to have a clear strategy that prescribes areas of priority, citing a strategic roadmap he unveiled in early 2010 after he took the helm of the lender in late 2009.

“The first set of priorities was geographic, which highlighted what the bank needed to achieve in Singapore, Hong Kong and other key Asian markets,” he said.

“The second set of priorities was centered on businesses which DBS wanted to build regionally, namely, wealth, SMEs (small- and medium-sized enterprises), transaction banking and the customer component of treasury and markets.”

He also stressed that disciplined execution against strategy is a must for a bank to achieve sustainable growth.

“Having a good strategy is only the start. Over the past six years, our performance has been catalyzed by aligning an entire organization of 22,000 people behind common goals,” he said.

Finally, the chief executive said that banks should seek ways to create a highly engaged workforce by establishing a fun culture and sharing core values.

“Over the years, we’ve focused on a people agenda, ensuring that they find purpose and meaning in what they do, and have an opportunity to learn and grow. We are probably one of few organizations that have enshrined having fun as one of its core values,” he said.

“Today, our workforce is among one of the most engaged in the world, and our employee turnover among the lowest in our key markets. Since people are our biggest asset, this has translated into a better performance all around for the bank.”

The bank delivered 28 quarters of income growth. Its 2015 earnings reached $3.21 billion with net profit of $3.2 billion. Its return on equity reached 11.2 percent in 2015, well above the 6.71 percent for Shinhan Bank, the most profitable lender in Korea.

The following is an excerpt from the interview.

Q: What kind of strategies should CEOs at banks deploy to stay on top and ensure sustainable growth in the coming decades?

A: Banks need to adapt or die. But this shift isn’t something that can be constrained to a few people at the top. The mindset change needs to pervade the entire organization. This is why at DBS, we are committed to ensuring our 22,000 people embrace a digital mindset. DBS was the first bank to incorporate hackathons into our talent development program.

At these hackathons ― events in which computer programmers and others involved in software development and hardware development, employees work with start-ups to create prototype mobile apps to address business problems.

This enables them to gain exposure to the fintech culture, agile methodology and other digital working concepts. In all, the bank is running over 1,000 experiments, giving our people the exposure they need so we can innovate as a bank. Fintech, or financial technology, is a concept describing a business based on software to offer more efficient financial services.

Q: Do you have any plan to take over other banks in the region or global players to enlarge the size and expand global operation?

A: Our energies are very much focused on the digital agenda. If we come across good bolt-on acquisitions that fit our strategic objectives and will be earnings accretive within a short period of time, we will look at them. However, it is unlikely we will pursue large, transformative acquisitions. In many ways, we see large M&As as the frontier of yesteryear. We’d rather not be caught fighting yesterday’s battle. We’d rather focus on tomorrow’s war.

Q: As chief executive, on what area are you going to place top priority in the coming years? Can you tell me how DBS will look like in five to 10 years?

A: My priority for DBS in the coming years is the embrace of innovation and the digitalization of our business. Fintechs are beginning to unravel the financial services chain, and we need to be able to respond. We are already making good progress on this front. Today, we are seeing a larger proportion of customers start relationships with us through digital channels.

For example, in 2015, 16 percent of new wealth customers opened accounts with us digitally. Fifty-one percent of SME customers in Singapore did the same through our Online Account Opening Service. Customers are also increasingly transacting and engaging with us online. If I extrapolate this five to 10 years out, digital will be at the front and center of banking and we will likely see increased use of new technologies such as artificial intelligence, big data and possibly even robo-advisers in our business.

Q: Digital banking is now the keyword in the banking industry. How do you think that digital banking will change the landscape for banking industry?

A: We believe that harnessing the digital opportunity can not only help us protect our position in our core markets of Singapore and Hong Kong, it can also be a game changer to help extend our reach in the larger geographies. By harnessing the power of technology and prevalence of smart mobile devices, we can reach customers anywhere and anytime. This means we can reach out to a broader customer base in growth markets without the need for an extensive physical branch network.