Use minimal essential How do you build business-ops teams, and how do they interact? And we remind ourselves that it’s not only the executives at the top, that it’s not just the IT folks, that it’s not just the business folks, it’s everyone. We were trying to figure out how to scale our presence in India, where we had very few branches. We obsess over those scorecards and critique each other’s scorecards. Press enter to select and open the results on a new page. You then have to think about how you engineer the technology and how you build for modern systems that are scalable, elastic, and made for experimentation. Digital transformation has become a matter of survival. What I mean by that is, we understand banking, and we understand credit and market risk and how to build great mortgage systems. The middle part is where the core of the digital transformation comes in, and we ascribe 20 percent of the value of the scorecard to this, which is then used to drive compensation for the company. Chng Sok Hui: I think we needed to learn how it is that we can become digital to the core, but I think that we also need to learn how to change in terms of our own mindsets and in terms of the organization culture. Furthermore, participation by senior management … Chng Sok Hui: We have been running this digital value creation metric coming to five years now, and I think the value that I can see out of this is that the businesses themselves are very passionate about it. Unleash their potential. So not so much an inward process, but how the customer would actually experience the app that we wanted to put out. So what’s the difference in your approach versus what the other banks are doing? In 2017 David became the first CIO from an Asian company to receive the prestigious Massachusetts Institute of Technology (MIT) Sloan CIO Leadership Award. The top part of the scorecard is all financial metrics, customer metrics, shareholder value-add, and revenue generation. Levels of satisfaction are relative. Please try again later. Something went wrong. Obviously, we wouldn’t make any money and that wouldn’t be a good outcome. So those five elements became the mission that we’re on and the delivery pipeline that we started to build. There is no doubt new digital technologies are changing the banking industry. If you embed that into the KPIs and scorecards that everybody’s measured by—and make sure it’s continually reinforced from the CEO and the leadership team down—then you get results and can shift and move. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. In fact, we spent the first five years of our transformation putting in place common platforms that are strategic across all of our locations. Learn more about cookies, Opens in new Subscribed to {PRACTICE_NAME} email alerts. Digital transformation should not only help them increase customer satisfaction and prepare for the new age of banking, but also to generate more profits. DBS Bank recognized that digital transformation doesn’t just mean building a new website or putting on “digital lipstick,” as their CIO said in an interview with McKinsey. Without those clear missions, we’d have had people going in all sorts of different directions. The first is to create a separate internal organisation with a remit to develop new digital products and services, unencumbered by the bank’s existing legacy processes and technology. Reinvent your business. One is how we digitized to the core. Digital upends old models. In an interview with McKinsey’s Joydeep Sengupta, Chng Sok Hui, Chief Financial Officer of DBS, discusses how mindsets and culture are just as important as technology for a digital-forward bank. Welcome to The Finanser by Chris Skinner. It seems much of the Fintech action in recent years has been in retail banking and for the casual observer, the digital transformation of commercial and corporate banking still appears to be stuck in the analog world. According to a McKinsey report on ‘The people power of transformations’, 70% of digital transformation projects fail due to a lack of employee engagement. The other thing we did very well I thought was customer-journey thinking, and thinking about the customer. Now that might sound a little cheesy, but in actual fact, it was an amazing rallying call to our people. In a 2012 report (PDF opens), called “Digital transformation in 10 building blocks to boost customer experience and ROE”, the Efma (a financial industry organization promoting innovation in retail banking) and McKinsey indeed stated retail banking was lagging behind in digitalization/digitization. Chng Sok Hui: The way it started is the realization that we were not just a bank, we were becoming a technology company. Digital transformation is complex and means different things to different people, she adds. Never miss an insight. Learn more about cookies, Opens in new Persistently low interest rates had forced banks to revise their business models and seek out new sources of revenue. Digital and analytics Bank of the future Previous McKinsey on digital transformation in banking (free research) Related Articles. In their struggles to get digital transformation initiatives over the line, banks typically take one of two approaches. Reinvent your business. Prior to joining DBS in 2008, he spent 20 years at JP Morgan, holding senior regional positions in Technology & Operations. Something went wrong. tab. We learned you have to embed this thinking into the management fabric of the company. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. According to the Mckinsey survey, financial service executives across the world believe enhancing customer experience is the top priority for digital transformation projects, 76% of participants value investing in customers while 16% prioritizes productivity and operational cost reduction in digital transformation strategy. 10 hours ago. We believe we were the first bank to make this effort to link the methodology of how we demonstrate digitalization efforts and link them directly to the P&L. A shift to digital use of this magnitude would probably have taken at least a couple of years without the Covid-related branch closures, according to McKinsey. With that, you can really start to practice agile at scale. No idea. At the same time, they must manage the risks created by the new digital economy. January 9, 2020Singapore-based DBS bank has earned multiple “best bank” titles, from publications including Euromoney, The Banker, and Global Finance. So today when I look back I actually see an awesome culture change that has actually happened. We were actually pushing out releases weekly into the app store. Please use UP and DOWN arrow keys to review autocomplete results. They were hard to shift, and they went through this whole transformation agenda, and along the way, built a load of tools that we thought we could also use. So if they’d done it, we could do it. Things worth reading: 26th November 2020. So you’d have these meetings and people would ask, “How could we possibly not have known that?” Well, it’s an experiment. Unleash their potential. Sengupta: Do you see any impact on the culture of the organization? So we had to learn as we go, which means we had to iterate very fast. Learn about Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. McKinsey senior partner Joydeep Sengupta, leader of McKinsey’s Strategy, Organization, and Corporate Finance Practice, sat down with Chng Sok Hui, DBS’ Chief Financial Officer, to discuss the bank’s approach to digital transformation. We were able to show that digital customers had two times higher income per customer compared to a traditional customer. We came up with a mobile-only offering. hereLearn more about cookies, Opens in new And I would not necessarily focus on the pet projects. In a digital driven bank or credit union, digital is treated as a … The first thing is that most of these technology companies started much like where we are today. Banks are racing to take advantage of market opportunities available through digital transformation. So how do you attack a market of a billion people? Please try again later. Create a financial supermarket. But how do you build a mobile-only bank in India and attract customers at scale? We also learned about their culture and which cultural elements we could take on board and shift. It is a vital change in how banks and other financial institutions … When we were thinking about the digital transformation of DBS, we saw three key elements as vitally important. Taking a page from some of the larger digital businesses, banks can … We were able to demonstrate that the digital segment had cost-to-income ratio that was about 34 percent—20 percentage points lower compared to the traditional segment of 54 percent. business management consulting firm McKinsey & Company, 70 percent of banks have digital risk “prominently on their radar.”1 RSA believes the critical question is whether FIs will confidently pursue the opportunities digital transformation presents, or focus instead on the risk it creates. Subscribed to {PRACTICE_NAME} email alerts. Digital upends old models. If you just say you want customer journeys, that's not going to drive results. In fact, almost everyone had to go through a process of coming up with an app. He also plays a lead role in driving the bank’s innovation agenda, which encompasses design thinking, agile methodology, data analytics, fintech partnerships, and hackathons etc. So, test and learn, test and learn, test and learn was the only way we could get into a brand-new market with a product that we had simply no idea how it was going to operate when we launched it. It was very clear, something people could act on, and that drove massive change through the organization. Instead, digital transformation means becoming digital to the core, pushing customer-journey thinking throughout the organization, and modernizing the organization’s culture. Most transformations fail. David Gledhill brings to his leadership roles at DBS Bank more than 25 years of experience in the financial-services industry, 20 of them in Asia. For example, our DBS remittance product: it’s fully digital, and therefore whatever additional customers you acquire, additional number of transactions, actually the benefits flow through to the bottom line. One was to shift from individual projects that need approvals, subcommittees, and things like that, to giving the freedom to a group of people to operate like a platform. tab. Never miss an insight. Press enter to select and open the results on a new page. Once that’s set for the year, it’s very clear what everyone’s mission is. Please click "Accept" to help us improve its usefulness with additional cookies. The technology is available to digitize more retail-like functions, such as relatively simple documentation and simple deals, and often a commercial bank can leapfrog using a retail bank’s experience with digital transformation. Strategic choices for banks in the digital age. It was really going into how these companies are engineered. Join to Connect Axis Bank. When we thought about how we wanted the business to digitize, we came up with a very simple framework of Acquire, Transact, Engage—customers Acquire digitally, Transact digitally, Engage digitally—and drove metrics around that. The main problem, paradoxically, is that legacy solutions still work. Select topics and stay current with our latest insights, Transforming a bank by becoming digital to the core. I understand how to create a mortgage product and sell it, and I know how to build systems for it. Digital transformation is a Trojan horse. Most transformations fail. I’d say you really need to boil down the essence of what your mission is and what the problem is that you’re trying to solve. But for the analyst to translate that more concretely into a valuation model—because these are not technology analysts, these are banking analysts—the way that we have communicated is: how these operational metrics translate into a lower cost-to-income ratio. Open Banking, Expanded Opportunities. We use cookies essential for this site to function well. If you focus purely on digital and forget the organizational change you have to make, you won’t get very far. I just had a review meeting with one of the business units today and they were talking about the way they go about trying to accelerate digital adoption; so, for a traditional customer, how do you introduce incentives, products to attract them to buy a digital product? all these are good metrics. The third was changing the culture of the company to make it feel and operate like a 22,000-person start-up. our use of cookies, and Please use UP and DOWN arrow keys to review autocomplete results. Focus instead on what gets the business moving, what gets speed to market faster, what gets journey thinking embedded in the organization, those sorts of things. Of course, we don’t know. Dy. People create and sustain change. Abstract Digital Transformation is far beyond just moving from traditional banking to a digital world. Today, the … Now first of all, we had no clue how it was going to work. . Chng Sok Hui: The key is to be able to translate operational metrics. Below that we have the strategic initiatives we need to get done, and that’s another 40 percent. Change, that is, that applies to: The McKinsey survey found that the COVID-19 pandemic has significantly accelerated the pace of adoption of digital transformation technologies, as well as … Making money out of a crisis. I remember we had human-centered design thinking. It got them to think, “We’re not acting like another bank, and here’s how we really start to transform ourselves like a technology company.”. Holding senior regional positions in technology & Operations understand how to learn as we go, means... Had two times higher income per customer compared to a traditional customer those scorecards and each. Offering we did in India and attract customers at scale the world, customers generally... 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