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Bits, bytes and banking

DBS chief says banks that ignore innovation will risk becoming obsolete.

Mr Gupta says that in the medium term, banking is going to go through profound and fundamental changes. But the future is going to belong to people who get the transformation right.

THERE is no doubt DBS has taken technology very seriously over the last five years. There is also little surprise, considering that its chief Piyush Gupta has argued banks that ignore innovation will risk becoming obsolete in a decade - an expiry date that he already finds too generous.

In leading DBS's charge in tackling the threats - and opportunities - from technology, Mr Gupta, celebrated this year as Singapore Business Awards' Outstanding Chief Executive of the Year, has snapped DBS out of its comfort zone as Singapore's biggest bank. And at the centre of this, he tells The Business Times, is to raise the standards of customer service.

"A large part of the DBS culture was very good. It's a very collaborative culture. It's a really purpose-driven culture, trying to do real things with real people. What we tried to do was to add to that, a little more entrepreneurial culture. A little more risk taking, a little more pizzazz in the culture. We've come a long way," he says.

Mr Gupta has spent much time building leaders in his team, "building our own timber", in his own words. And as a successful leader himself, he thinks having a helicopter view is key.

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"It's the ability to go up and to have a strategic view, and to go down and be able to focus on the execution and the details. I think a lot of business leaders either do the first (but) they take their eye off the ball, or are so focused on the execution that they don't have a good vision."

To bring more zest to the Singapore banking behemoth, Mr Gupta has turned his staff's attention to customers. "The rubric is very simple: if it makes sense for the customer journey, it's probably okay to go ahead and do it."

Which explains why among the priorities for Mr Gupta when he stepped through the doors of DBS in 2009 as CEO, was to cut the queues at POSB and DBS branches, where people would line up for some four hours during Chinese New Year to take some money out.

"I just don't think we worked hard enough at trying to evolve it into the new world with what we stand for," says Mr Gupta, when asked about the intense work behind POSB, which DBS acquired in 1998, and that effectively gave DBS its advantageous deposit base today.

The Post Office Savings Bank was set up by the British colonial government in 1877 to offer banking services to lower-income groups. In 1951, the bank was pivotal in the government's strategy to drive post-war savings and check inflation, especially as it spurred kids to save.

"There were times in the past where there was the view that DBS was trying to eliminate the POSB brand and the POSB franchise. But we thought POSB is such an emotive and powerful brand in Singapore that we should actually invest in it as opposed to letting it run down," he adds.

"The biggest challenge that DBS and POSB had five, six years ago, was the queues. The good thing was that people came to us. The bad thing was that they stood in line for an hour, two hours, at our ATMs, at our branches. That's not good service. We focused very hard on that. We wanted to keep the customers, but we wanted to give them an experience that was deserving of today's kind of bank."

Today, customers use SMSes to book a place at the branch. In the lead-up to Chinese New Year, DBS would put up pop-up ATMs across the island, stuffed with new notes used for red packets. Customers also can withdraw money anytime from retail outlets such as 7-Eleven, Cold Storage, Jasons and Sheng Siong stores in Singapore. For larger withdrawal amounts - up to S$5,000 - customers can head to SingPost outlets.

Behind the scenes, the bank has tried to limit the angst customers face in dealing with call centre staff. Last year, it allowed staff at branches and at call centres to make decisions on refunding customers on small transactions that were wrongly debited.

"We've never done that before, because we had thought it was too much risk. That people might make the wrong decisions, people might give away some money that they weren't supposed to. But you've got to figure out that people are responsible. They want to do the right thing for the customer. We'll give them broad guidelines on what's sensible, and what's not sensible. And they will generally make the right decisions," Mr Gupta says.

"They feel empowered because they don't have to go through six levels of bosses to return twenty bucks. And net-net, the cost to the company is not that huge."


DBS has led the way in many experiments in banking services.

The bank has been experimenting with talking ATMs to help customers who are visually impaired to withdraw money. It has also been using data analytics to monitor the utility rate of ATMs. This reflects its savvy ways with technology, as a branch and ATM network are high costs for all banks.

It has created nifty apps, such as HomeConnect, which allows homebuyers to find out the valuation of a property just by pointing their mobile device at it - an innovation based on augmented reality technology.

The bank introduced DBS PayLah!, which allows customers to quickly transfer funds to others via their mobile phones. Then in 2015, it launched FasTrack, which allows customers to direct orders and make payments at quick-serve restaurants in Singapore, disrupting the national pastime of queuing for food.

DBS has been quick to embrace startups, committing S$10 million to run programmes such as partnerships with accelerators and incubators in Singapore.

This is on top of the S$200 million that the bank in 2014 said it would invest in digital banking over the next three years.

For the fourth straight time, the bank, under Mr Gupta's leadership, was named Trailblazer of the Year in Asia in 2016 by trade publication Retail Banker International.

A change in service has gone beyond the retail clients. Its wealth clients have access to digital platforms to trade at their own time.

In a landmark deal, DBS partnered with IBM's Watson in 2014 to have the IT giant's famed cognitive computer analyse reports on behalf of the private bankers and clients, so as to churn out investment ideas for wealthy individuals. This three-year agreement, Mr Gupta says, has helped DBS, though he suggests that it's work-in-progress.

"Watson has not been 100 per cent of what we wanted to do. I was hoping Watson would be able to read any kind of unstructured information, and make sense of it. It's a little short. . . if I let it loose on let's say Bloomberg . . . it's not that good, because it gets confused with the terminology," he says. It is also not as sensitive with how time can affect market value, he observes. A view of the Sing dollar in the afternoon could be very different from the view at 11 o'clock in the morning.

"What it can do is already very powerful for us. For our purposes, we find that as long as we can put a finite number - and in any case, our bankers only look at twelve hundred pieces of research - and feed it, then it's quite helpful for bankers to figure out what products to sell."

Mr Gupta is confident that in 10 years' time, computers will be able to do most of what human beings can do.

"Lots of people are taking different stabs at the same thing. How do you get a machine to read, apply intelligence, and give advice?" he asks.

"Artificial intelligence excites me, and it scares me. I can see every year, that the ability of the machine to think like human beings is improving. It's not there yet, but I'm pretty confident that in 10 years' time, it will be able to do most of the things that human beings can do. And that's a massive opportunity. There are also social and moral questions about what we do, and what we won't do. It will be an area worth watching."

Mr Gupta himself had taken a quick plunge into the startup business during the dot-com boom. At 40, he set up an Internet portal in India. But that soon folded as the bubble burst, and money from venture capitalists dried up.

But as many say, this time, it's different. Technology has improved by miles, and today, much of wealth has been created in the top technology firms at Silicon Valley.

"Technology gives massive opportunity. You think about the notion of wealth creation. Today, the greatest social mobiliser is the Internet. How has wealth been created in the last hundred years since the Industrial Revolution? It has always been in creating large corporations. Because the assembly line process that was created, meant that you needed economies of scale. You needed to build large companies that have huge amounts of capital, and then you could really become wealthy," says Mr Gupta.

"The Internet changes all of that. The Internet allows you to go back to a world that is pre-Industrial Revolution. It takes you back to a world where entrepreneurs operated. In this world, anybody can sit at home and be part of a global distribution system. Instagram sold for a billion dollars. You don't need economies of scale. Nine people got together. So talk about democratising of opportunity. There's a lot more of that today than there was in the industrial economy."

Mingled with that is the fear that the financial technology companies are eating at the profits of banks, with the likes of Alibaba selling loans and wealth management products in a way that banks have not been able to catch up to, notes Mr Gupta.

"Where does Apple make money from Apple Pay? The consumer is not paying, the merchant is not paying more. They are taking a piece of the pie from the banks," he says.


And while he expects regulation to create a level playing field in time, Mr Gupta is not holding out for regulation to save banks from disruption.

"I don't think any regulation will help banks to stay inefficient. I can guarantee you this. Will regulation come in to say 'okay, you can stay inefficient and everybody else in the world is efficient, you can build an ivory tower of inefficiency?' It won't happen. There are situations where some of the non-banks don't have the same regulatory standards. It will catch up, it will level out. But that's not fundamental," says Mr Gupta.

"I think the new technology allows you to build a more efficient platform, and more efficient ways of doing things. Banks have got to figure out how to transform and provide the same platform. Then you can win. But if you're stuck in doing things the old way, then why will consumers stay with you? They will go to the most effective and efficient player."

DBS is carefully monitoring the developments in blockchain, a form of distributed ledger that came about with the development of virtual currencies. In December, DBS, Standard Chartered, and IDA jointly announced that they had successfully completed a proof of concept to deliver the world's first application of distributed ledger technology to boost security of trade finance invoicing.

What this does is to have banks put physical copies of invoices into a digital and distributed ledger that all participating banks can access, while preserving client and commercial confidentiality. This is meant, in part, to prevent duplicate financing of the same invoice by different banks - a nagging problem with trade finance that played out in the Qingdao fraud case in 2014.

"If you think about it in finance, the notion of value has always been around a ledger system. Banks keep track of people's accounts, stock exchanges keep track of people's stock holdings. A distributed ledger destroys the whole concept. You don't need a central authority to keep track. That can revolutionise the way people think about value," he adds.

He also sees a future when virtual currencies could become commonplace. As long as central banks take control of the issuance and stand behind the currencies, as opposed to third-party private operators, it would not be very different from the shift in the gold standard.

"If you think about it, in the old days, before central bank, people just traded in gold, then they moved to paper. Now you can move to bits and bytes. As long as there is somebody who stands behind it, I think it still works. The fact that it's only in bits and bytes as opposed to a tangible form doesn't mean anything. The distinction is only in who's the issuer," says Mr Gupta.

"In the medium term, our industry is going to go through profound and fundamental changes. To me, that's the big thing. You have to be relentlessly focused on this transformation. It's easy to get caught up in the short-term issues around volatility. But I think the future is going to belong to people who get the transformation right."