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How the biggest bank in Singapore is driving digital innovation in Southeast Asia

Should adapting services to a customer always be at the top of a bank’s agenda in every market? DBS Bank’s internationalization strategy is built on the cornerstone of a customercentric digital platform which goes beyond banking by focusing on the customer’s lifestyle and evolving needs.

March 20161 marked a watershed moment for DBS Bank as it launched its innovative full-stack digital banking platform, the digibank, in Singapore. In the first two weeks of its soft launch, the app had seen more than 200,000 downloads2. Within a year, DBS Bank had expanded the app across two high growth markets: India and Indonesia. Today, the bank is servicing more than two million online users in both countries and is expecting 8.5 million customers by 2021 — and none of them would ever set foot into a DBS branch. A US$375b3 asset size bank which serves more than 80% of Singapore’s population, digibank represents a FinTech-led strategy for entering new markets and growing organically, and to move forward in a digital-led economy and getting more embedded within their customers’ lifestyle. It is meant to manage customer digital engagement and provide a range of services centered on the evolving life needs and lifestyle of the customer. For DBS, payments and transaction enablement was a starting point in many markets, in order to acquire customers and create stickiness. Over time, digibank is expected to evolve to offer the entire suite of banking services and more. This is what lays behind its “Live More, Bank Less” vision. EY has been a proud collaborator to DBS in this journey, advising on the formulation of strategy for Indonesia.

Source: 1. DBS Website 2. DBS Website 3. DBS Annual Report 4. EY Research

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| How the biggest bank in Singapore is driving digital innovation in Southeast Asia

The battle for the Indonesian customer It is evident that the increasing use of technology is changing consumer behavior in Indonesia. Despite being mostly unbanked, Indonesia boasts a young and techsavvy population. The country has over 106 million social media users who make over 3.2 million paid online transactions per day4 on social media and e-commerce websites. Although most consumers still make payments through bank transfers and cash-on-delivery, it is observed that many people are already using or interested in internet banking. Capitalists and entrepreneurs have surely taken notice, with some of the region’s largest tech-unicorns based here, including Go-Jek, Tokopedia and Traveloka. Some of the largest FinTech conglomerates in the world, including Alibaba’s Ant Financial, Tencent and Softbank, have made significant investments in this market. The local conglomerates, including Sinarmas Group, Salim Group and Lippo, too have launched their own digital propositions, to form protective moats around their ecosystems. The battle for the Indonesian customer’s attention is on and it is anything but pretty.

In this highly-competitive environment, EY worked with DBS to answer the following questions to form their growth strategy in Indonesia:

• What business propositions will solve the customer’s key and urgent pain points today?

• What use-cases will give digibank a distinct value proposition to differentiate itself?

• Will the proposition help digibank accelerate customer acquisition?

• Can this be a tactical move that has high future strategic value as well? DBS understood that to grow its business in this environment, against competitors that in many cases did not have the pressures of quarterly public capital market reporting, it needed a differentiated and compelling proposition. It was going to be important that the digital bank addresses the pain points customers most often face, including inconvenient transaction handling, lack of service personalization and lack of context.

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Providing digital banking services will soon come to be a norm in the market. We want to be more than a provider of simple and effortless online banking, we want to provide an experience where banking is seamlessly integrated into the lifestyle of the tech-savvy and young population in Indonesia. Leonardo Koesmanto Head of Digital Banking, Consumer Banking Group DBS

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Defining “banking” for a new age By seeking to integrate into all aspects of the customer’s digital life, DBS and EY are enhancing customers’ digital banking experience, integrated multi-channel transaction features to improve stickiness and fractured and fragmented customer experiences will provide opportunities for entry via interoperability.

While increased acceleration in grassroots innovation is great for solving societal pain-points and offering a variety of services across segments, it also leads to increased fragmentation. Moving between platforms is clunky and not seamless, leading to a broken customer experience, errors and increased operational risks within platforms. Imagine buying, paying for and getting delivery of an item of interest off of an Instagram hosted store? There are multiple points of failure. DBS is very much aware of these existing and evolving painpoints, and a seamless customer experience is at the heart of digibank. Larger Indonesian local banks have adopted internet banking as the core feature of their service proposition. As Indonesia consumers becoming more digitally adept, the preference toward digital channel comes naturally into play. With increased competition from outside the traditional financial services sector, there is a need to go beyond offering a highquality web and mobile experience. It requires a complete rethink of the current financial services delivery model:

Numerous factors influence customer experience, many of which are intangible and driven by emotion or perception. In the past, banks have focused on giving competitive interest and merchant discounts. EY research however, suggests that customers put greater importance on intangible factors such as convenience and relevancy. The more banks can remind customers on a daily basis of their superior service, the more likely customers will pick them as the bank of choice in all aspects of their life. The DBS strategy is one such compelling approach to a transactional digital banking. “To win the digital banking competition, a bank must strategically manage multichannel, to create a seamless customer experience,” says Nam Soon Liew, Managing Partner, EY ASEAN Markets Leader, Ernst & Young Solutions LLP, “An integrated transaction-platform ensures the transaction journey remains reliable regardless of the customer’s preferred device. This process will help to create a wonderful and consistent experience for customers, thereby increasing their loyalty to the platform.”

• From product centric, to customer centric • Process orientation, to customer experience • Competition to collaboration • Traditional product placement to contextual • Low engagement to high engagement

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| How the biggest bank in Singapore is driving digital innovation in Southeast Asia

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A platform wrapped around customers’ daily life is the perfect place to offer additional services. Such feature helps DBS enrich its relationship with existing customers and at the same time, increase monetization opportunities. Patrick Hanna Partner, Transaction Advisory Services Leader Ernst & Young Solutions LLP

Building scale through beyond-banking ecosystems Capitalizing on the emergence of integrated digital ecosystems that serve customers without having to leave.

Looking into such trends, EY professionals advised DBS on how to capitalize on opportunities within the banking and non-banking journeys of the customer.

With the growing number of traditional players (e.g., banks, telcos, etc.) and new-economy players (e.g., FinTechs, ride-sharing platforms, etc.) offering digital services, there are increasingly blurring boundaries between sectors. This trend provides ample opportunities for financial institutions to merge their services into customers’ daily life, including bringing offline services to online.

“The starting point was more than 50 different retail payment use-cases that surround a customer’s life. Narrowing them down on criteria such as, macroeconomic trends, use-case market potential, existence of competition, ability of DBS to create a differentiated proposition, etc., the number of use-cases was eventually narrowed down to three and presented as recommendations. This ‘Growth Hack’, built upon EY’s proprietary use-case scoring framework, allows platforms to objectively evaluate use-cases and select the ones that allow them to meet their business objectives.” says Patrick Hanna, Partner, EY Transaction Advisory Services Leader, Ernst & Young Solutions LLP.

“For customers, banking service is a means to an end: buying groceries, growing a business, or purchasing services. By only attending to one part of the customers’ journey, banks might miss out on substantial value. As Asia’s banking customers migrate to digital channels, banks are expected to follow suit by developing integrated digital banking capabilities,” says Varun Mittal, Director, EY Global Emerging Markets FinTech Leader, Ernst & Young Solutions LLP.

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Better digital banking experience means a better life for customers Live more, bank less!

DBS’ foray into Indonesia and India has resulted in an exciting strategic approach to digital services that solves key societal pain-points, while allowing for a seamless, integrated and personal digital experience. In emerging countries where there are more internet users than there are banked customers, this approach can drive significant growth, while managing customer acquisition cost. The platform successfully helped to enhance customers’ experience as well as attract new customers.

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Launching a successful digital banking operation requires understanding the customer’s behavior evolution and the resulting change in their needs. By focusing on customer-centricity, banks will be able to deliver superior digital experiences and stay ahead of their competitors. Varun Mittal Director, Global Emerging Markets FinTech Leader Ernst & Young Solutions LLP

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| How the biggest bank in Singapore is driving digital innovation in Southeast Asia

Contacts For more information, please contact:

Liew Nam Soon Managing Partner, ASEAN Markets Leader Ernst & Young Solutions LLP +65 6309 8092 [email protected]

EY |Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. © 2019 EYGM Limited. All Rights Reserved. EYG no. 012396-18Gbl BMC Agency GA 1010625 ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice.

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