The issue is that digital needs to get into banks: DBS Bank’s Neal Cross
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As managing director and chief innovation officer, Neal Cross spearheads the digital drive and innovation agenda of Singapore-headquartered DBS Bank Ltd, which was named the “World’s Best Digital Bank 2016” by Euromoney Awards for Excellence. The first bank in India to use the Aadhaar biometrics for customer acquisition, DBS went from “zero to 500,000 customers” in six months. In an interview, Cross talks about the bank’s digital initiatives, telcos’ move into banking and the impact of artificial intelligence (AI) on banking. Edited excerpts:
What are the new initiatives that DBS Bank has undertaken recently in digital banking?
If you think about what’s happening in our industry, as well as in many other industries, there is a push towards digitalization. This is a given in the times of digital disruption. But I think many financial institutions and corporates misunderstand it. Banks in India and elsewhere think that they need to get into digital but that’s not the issue: the issue is that digital needs to get into banks. Once you understand that fundamental and think of yourself as part of the digital ecosystem, it will help you prepare for the future and figure out your competitors. For us, we don’t really look at banks as our competitors in this space, for a number of reasons. One is that most of them are quite far behind. Also, this is not about banking but about digital. A good example in India is Paytm, and in China it is Alibaba and Tencent. Also, there are many fintechs around the world. Once you understand that, your strategy is no longer confined to just making the mobile offering a bit sexier, or plugging it into the social media and saying, “Hey, we are done!” That’s not the approach we took. We had a fund of 200 million Singapore dollars to do our digital strategy, which we first did in India. So it was a lot of money, a lot of people and a lot of work with a lot of smarts in there. What we did was a lot of hackathons and customer immersion events to really understand the key personas of our potential customer base. And that process was on for a long time (about six months). Alongside, we also started on the back-end process, which essentially cut the bank’s technology in half. What we did was hide a lot of complex systems in the back-end through a new Enterprise Service Bus architecture. So we built brand new code on top of our existing back-end assets for our Digibank application. This also enabled us to open up to partnerships such as the ability to connect to Aadhaar. We then moved on to API (application programming interface)- based banking and truly digital platform systems for banking through multiple business partnerships. I believe we delivered the world’s most advanced digital bank.
So, how do you define the world’s most advanced digital bank? What are its characteristics?
It has a lot to do with the onboarding of customers and how the organization is run. One of the key things is that we operate like a start-up—we went from zero customers to 500,000 in six months. And the processes we used in raising this start-up included design thinking, taking into account the customer journey and the like. Our onboarding process is second to none. Besides our quick onboarding process that uses Aadhaar biometrics for KYC (know your customer), 90% of customer queries are handled using AI-based chat robots.
Have you built the applications internally or with partners?
It was built by internal staff and obviously, we have partnerships across different products and services. The technical team is split between India and Singapore. In fact, we are hiring 1,500 people in Hyderabad; we have about 600 at the moment. We have designed the Digibank applications in accordance with our mission to have minimal banking operational costs in India as well as other parts of the world. This enables you to offer higher savings rates to your customers.
How do you see the move by telcos such as Bharti Airtel to get into banking?
If you see it generally across the world, telcos have had this opportunity to move into the financial space for decades but not much has changed on the ground. We saw in Africa the success of Safaricom, but it was a surprise to them and the rest of the world that banking could be done through SMS (short messaging service). Now telcos are looking at how they can do this. But they could have done it decades ago. And they didn’t need a banking licence to do that—they could have partnered with a bank as they have the distribution network, the credit records and all sorts of things that are useful to the world of finance. We are now seeing a lot of movement among the telcos in this region, including in India and Indonesia, but we have not seen the same level of success we have seen in Africa. But different markets have their peculiarity and we’ll have to wait and see how it works in India.
How do you think AI, especially chatbots, is doing in the banking industry?
Intelligent bots are useful in doing things like looking up FAQs (frequently asked questions), filtering a customer’s spending at a coffee chain according to certain parameters, etc. But can you have an intelligent conversation with a bot about your wealth? The answer is, No. I don’t think that will happen anytime soon. Perhaps it will be five to 10 years before we see that kind of value in the front end, but there’s a lot of robotization happening in the back end right now and systems are enabled to talk to each other more easily. Systems are being made more and more “fuzzier” now to take decisions where humans were typically involved.