DBS explores metaverse concept as traditional income flows slow

Singapore

THE parallel universe afforded by metaverse - so popularised by Facebook's latest rebranding - is not so far-fetched a concept to DBS.

South-east Asia's largest bank is ticking off all the buzzwords that have emerged in the technology space in recent times.

It is "actively pursuing" the metaverse, decentralised finance services, and what is known as digital twin technology, DBS chief information officer Jimmy Ng said. "Now, people think that some of these things are really far-fetched, too far away. And there are always questions about the use of some of these," Ng said in an interview with The Business Times. "The use cases are going to come in ways that you and I cannot imagine. That's the same way (DBS) looked at blockchain many years ago. People said it's a ponzi scheme. Today, if you look at the way we have been using blockchain, it's actually quite different."

It comes as DBS's tech bench strength has been built up to make up close to 30 per cent of its workforce, with technology seen as a buffer against the squeeze in traditional income flows.

The bank can gain a first-mover's advantage once their use cases are made clear, though Ng stopped short at saying what these leads may be in the banking universe.

The metaverse, a term first coined in science fiction, refers to shared virtual worlds where people interact with digital objects and avatars.

Facebook recently changed its corporate name to Meta to reflect its new focus on the metaverse, while other tech firms like Microsoft and Tencent have also announced plans to build their versions of the parallel universe.

It's still early days, but Korean banks have already begun creating branches in the metaverse.

For example, Korea Times reported that Shinhan Bank had made plans to develop its own metaverse platform which will offer a virtual banking branch and financial education. Kookmin Bank has also reportedly created a virtual financial town with a virtual branch, where customers can also connect back to a real-life person through a video call.

Investing in technology has allowed DBS to diversify its income stream. Ng noted that during this Covid-19 crisis, interest rates collapsed to zero. "If you look at the fees, people were not spending in the initial days... We did very well in our trading revenue, but this is not something you would want to depend on, because it's volatile.

"So that really forced us to rethink, what are the other sources of revenue that we can create," he said. That was when DBS started looking into creating its own digital assets that can morph into new businesses.

Launched last year, DBS Digital Exchange is one of its blockchain-powered applications. It includes a crypto exchange accessible by institutional and accredited investors, a platform for security token offerings, as well as digital custodial services.

DBS is involved in Singapore-based global carbon exchange Climate Impact X, which uses blockchain technology to enhance the transparency, integrity and quality of carbon credits.

Along with JPMorgan and Temasek, it has also formed Partior, a blockchain tech provider for clearing and settling cross-border payments.

Last year, the bank set up a separate company named DBS Finnovation, which currently holds the DBS Digital Exchange, Partior, and Climate Impact X.

The bank's chief executive Piyush Gupta said during its quarterly trading update on Friday (Nov 5) that this structure widens its options in terms of bringing in private capital, or potentially going public with one of these entities.

Another technology trend that the bank intends to tap is decentralised finance, often known as DeFi, which is a system in which financial products become available on a public decentralised blockchain network, allowing stakeholders to interact peer to peer, without the need for an institution facilitating the transaction.

DBS is also looking at digital twins, which refer to virtual representations of physical objects and systems, which are often used for simulations or to test new products.

DBS has received queries from other companies interested in tapping its digital infrastructure, said Ng. "(They) are asking us if these are things that we would like to offer, but I think those are very early discussions," he said.

"But you can imagine, some of the services we have created, especially the infrastructure, are not only useful in the banking sector. It is useful also in highly regulated sectors that face similar challenges as us, like worries about security, data loss, while also not wanting to be locked in to third-party cloud service providers. Then what we've done provides a great template for them to adopt," he said.

DBS now has 10,000 technologists from 33 nationalities, making up about 28 per cent of the bank. Ng estimates that its tech bench strength is growing at a pace of about 1,000 employees each year. This is comparable to other mid-sized tech companies, he said.

In 2009, 85 per cent of DBS's tech resources were outsourced to vendors, Ng said. Today, having built up capabilities, 90 per cent are self-managed, he added. DBS's hybrid, multi-cloud infrastructure has also allowed it to tap the public cloud to build applications and reduce structural infrastructure costs. A total of 99 per cent of its applications today are hosted on its virtual private cloud.