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Executing the Digital Strategy
- 1. #CIOEdge #ADAPT @ADAPTVentures Global Guest Keynote DBS Bank Case Study: Executing the Digital Strategy David Gledhill Group CIO & Group Executive, MD & Head, Group Technology and Operations (Singapore)
- 2. Executing the digitalstrategy 1 The presentations contain future-oriented statements, including statements regarding the Group’s vision and growth strategy in the light of anticipated trends as well as economic and market conditions. Such statements necessarily involve risks and uncertainties, which may cause actual performance in future periods to differ from projections. Dave Gledhill CIO and Head of Group Technology & Operations 21st Feb 2018
- 3. DAVE@DBS Not Australian! Computing &Electronics 1st job – OS development 20+ Years 9 Years Reimagine DBS Lead 10,000 colleagues 20 Years 3 kids!
- 4. 2009 – 2014:Looking good… but? Net Profit 13% CAGR1 Income 8% CAGR1 Group income (S$m) 9,618 6,603 ROE to 8.4% 2009 10.9% 2014 1 2009-2014 3 2009 2010 2011 2012 2013 2014
- 5. …the world waschanging around usGlobalisation of Platform Giants Cost vs Efficiency to Scale Up Source: CB Insights Start-ups Unbundling Banking 4
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- 7. Our digital businessmodel: 5 key capabilities ECOSYSTEMS: Pipes to Platforms DATA: Be insights driven TRANSACT • Eliminate paper, create instant fulfilment • Decrease cost ACQUIRE • Increase customer acquisition through wider distribution • Lower acquisition cost ENGAGE • Drive ‘sticky’ customer behaviours, cross-sell through contextual marketing • Increase income per customer 6
- 8. EMBED OURSELVES IN THECUSTOMER JOURNEY BECOME DIGITAL TO THE CORE CREATE A 22,000 START-UP 7 Driving the transformation: Making Banking Joyful Make DBS ‘Invisible’
- 9. EMBED OURSELVES IN THECUSTOMER JOURNEY BECOME DIGITAL TO THE CORE CREATE A 22,000 START-UP Phase 1 Fix the basics (2009 – 2014) 8
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- 11. These foundation yearswere critical building blocks Start insourcing and build engineering bench strength Security operations centre Monitoring centre Data Centre revamp Build resiliency 10
- 12. Our application stackin 2009 needed a lot of work Teller Internet & Mobile Banking Corporate IB CRM Customer CASA and FD Private banking Liquidity Management Remittances Unsecured loans Secured loans Trade Finance Factoring Markets IBG MIS Credit Approval Finance Singapore Hong Kong Taiwan Indonesia ChinaIndia Overseas Branches Buy Hold Sell Review CHANNELSPRODUCTS&SERVICESENABLERS 11
- 13. Teller Internet & MobileBanking Corporate IB CRM Customer Private banking Liquidity Management Remittances Unsecured loans Secured loans Trade Finance Factoring Markets IBG MIS Credit Approval Finance Singapore Hong Kong Taiwan Indonesia ChinaIndia Overseas BranchesCHANNELSPRODUCTS&SERVICESENABLERS And by 2014, we had fixed the basics and were ready to build a digital bank Buy Hold Sell Review CASA and FD 12
- 14. EMBED OURSELVES IN THECUSTOMER JOURNEY BECOME DIGITAL TO THE CORE CREATE A 22,000 START-UP Phase 2 ▪ Increase velocity ▪ Leverage on new technologies (2014 onwards) 13
- 15. We went todeeply understand how the technology-driven giants built and operated 14
- 16. Technology transformation occurredto achieve cloud scale in data volume, processing and change velocity. Although the business needs & transformation journeys vary, these companies arrived at the same end-state ideal architecture 2000 2010 20152005 Drivers 6 years 4 years ▪ Cloud scale data volume ▪ Cloud scale data processing ▪ Unstructured data processing ▪ Complexity of environment ▪ Dependent on 3rd party vendor ▪ Deep level instrumentation ▪ Protection against outages ▪ Complexity of environment ▪ Change velocity Jan ‘16 – shutdown last DC ❖ Expensive and complex architecture ❖ 3 days to compile an application binary ❖ Full day web site inaccessible ❖ Coincide with 7 percent drop in stock price ❖ First quarterly customer loss July ‘07 ❖ Inability to support cloud scale with current enterprise technology ❖ Need to handle unstructured data An outside-in look at the industry technology journeys (of Gandalf) 7 years 3+ years ❖ Support rapid change - CI, CD, digital bank Our journey so far ▪ Cloud Scale ▪ Improved Speed ▪ Improved Resilience ▪ Open Source (e.g. MariaDB, Hadoop, Spark, etc.) 15
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- 18. We embarked ona strategy of 5 key elements to drive change throughout the organization 17
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- 20. Gandalf Transformation Targetsby 2018 Become Cloud Native Reduced Cost. Improved Resilience and Scalability Increase Release Cadence 10x Build for APIs and Performance Reduced Time-to-Market Customer Centric. Extending to Ecosystems Business Benefits ▪ Cost efficiency ▪ Resilience ▪ Time-to-Market ▪ Ability to extend to ecosystems ▪ Ability to experiment for improved customer experience Investing in People and Skills 19
- 21. To be atechnology leader, we wanted to own and run our own technology 1 2 3 DBS Outsourced 85% outsourced 85% insourced * DBS: includes all permanent staff and direct contractors Outsourced: managed services resources 20
- 22. Become Cloud Native Reduced Cost. ImprovedResilience and Scalability Increase Release Cadence 10x Build for APIs and Performance Reduced Time-to-Market Customer Centric. Extending to Ecosystems Business Benefits ▪ Cost efficiency ▪ Resilience ▪ Time-to-Market ▪ Ability to extend to ecosystems ▪ Ability to experiment for improved customer experience Investing in People and Skills Gandalf Transformation Targets by 2018 21
- 23. Everyone has acloud strategy CLOUD LIPSTICK? OR CLOUD TO THE CORE? DBS Gandalf , but not all are the same Typical banks 22
- 24. How do weachieve cloud architecture? ▪ Dedicated to one application ▪ One Supplier ▪ Customised Traditional architecture ▪ One Supplier ▪ Customised per application Built for customised Hardware and Software ▪ Open source: inexpensive to scale ▪ Standard: fault-tolerant through automation Cloud architecture ▪ Shared ▪ Many suppliers: inexpensive ▪ Standard: fault-tolerant through scale Built for Cloud 23
- 25. How is DBSdoing on Private Cloud journey? I want my own home 50% 93.8% Typical DBS How is the move going? % of Virtualization Achieved I want my own space 1:10 1:>65 How do the people share? Consolidation Ratio: Physical to Virtual I want to keep my own Less Critical Applications All Applications What about the fixtures and fittings (software)? Applications Moved to Cloud Optimized Software I want to automate it Some Aggressive How to service the apartments? Data Centre Automation EASY VERY HARD EASY EASY EASY VERY HARD VERY HARD VERY HARD Achieved Achieved WIP WIP 24
- 26. Typical Hardware Software People >80% DBSTraditional TypicalDBSApplication Most just adoptcommodity hardware and virtualise Massive savings with DBS’ Gandalf Cloud approach -20% 25 VERY HARD
- 27. How are wedoing on our Applications transformation Journey? Mostly Regulatory Systems 26Work in Progress Traditional and Typical Cloud DBS Optimized Cloud
- 28. Pushing the envelopeon cloud… Typical banks Busy consolidating data centres … and doing some cloud Consolidated our physical data centres years back … we’re now shrinking 2018 target – run 50% compute on Public Cloud Data Centres: 75% reduction by 2019 70% reduction in System Incidences, despite 166% increase in Operating Systems vs (2010-2017 Oct) 27
- 29. Jack Ma (Alibaba)to Walmart – “If you want 10,000 new customers, you have to build a new warehouse, hire people … for me? 2 servers.” Dave Gledhill to Jack Ma – “You need 2 servers for 10,000 new customers … For me 50,000 new customers need just 1 server” “For me 50,000 new customers need just 1 server” 28 *Image source: Forbes
- 30. 0.7 0.7 0.60.6 0.5 0.3 0.4 0.4 0.5 0.5 2014 2015 2016 2017 2018 Build Operate 9.9 10.9 11.5 11.9 DBS’ Technology Spend – Flat total spend in Phase 2 Shift happening from Operate to Build Total Income All figures are in S$ bn Total Income (Forecast) 1.0 1.1 1.1 1.1 1.0 29 Build core: 88% (2010) 44% (2017) Build digital: 12% 56%
- 31. Become Cloud Native Reduced Cost. ImprovedResilience and Scalability Increase Release Cadence 10x Build for APIs and Performance Reduced Time-to-Market Customer Centric. Extending to Ecosystems Business Benefits ▪ Cost efficiency ▪ Resilience ▪ Time-to-Market ▪ Ability to extend to ecosystems ▪ Ability to experiment for improved customer experience Investing in People and Skills Gandalf Transformation Targets by 2018 30
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- 33. Requirements Gathering ReleaseDevelopment Test and Quality Assurance Some learning Lotsof learning Minimal learning Cycle Time Knowledge is power 32 *Source: Amazon
- 34. To introduce changesto production, code needs to be… Written Scanned Built Tested and verified Deployed in different environments Manual Automate Manual Automate Manual Automate Manual Automate Manual Automate DEVELOPMENT ENVIRONMENT PRODUCTION ENVIRONMENT Manual Automate Manual Automate 33
- 35. Enterprise DevOps Platform- First we had to build complete automation pipeline 34
- 36. 2014 2017 Volume ofautomated test executions Aggressive automation has enabled us to move much faster and increase efficiency 7.5x 10X 10x 100% DevOps: % of automated application releases 2014 2017 100% 2014 2017 Cadence – No. of monthly deployments 7.5X 35
- 37. Become Cloud Native Reduced Cost. ImprovedResilience and Scalability Increase Release Cadence 10x Build for APIs and Performance Reduced Time-to-Market Customer Centric. Extending to Ecosystems Business Benefits ▪ Cost efficiency ▪ Resilience ▪ Time-to-Market ▪ Ability to extend to ecosystems ▪ Ability to experiment for improved customer experience Investing in People and Skills Gandalf Transformation Targets by 2018 36
- 38. The design formodern systems – Enabling us to massively scale… with ecosystem partners through APIs 37
- 39. Towards Making BankingInvisible… through APIs ✓ 8 million SMEs ✓ 30,000 salespersons ✓ DBS Inside 38
- 40. How could wedo this at scale? 39
- 41. 50+ Live partners 150+ Live APIs We launchedthe world’s largest banking API platform in early November 2017 40
- 42. Move from being product-focusedto customer-centric EMBED OURSELVES IN THE CUSTOMER JOURNEY BECOME DIGITAL TO THE CORE CREATE A 22,000 START-UP 41
- 43. (2) My Finance (3)My Way CASA Cards TD InvestmentsLoans Mortgages Payments Insurance My Utilities My Health My Shopping My Transport My Car My House My Pension My Child’s Education My Wedding My Entertainment My Travel My Education (1) My Everyday Life & Goals Make banking ‘invisible’ Context Location 42
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- 45. What is…. …1 lessretained card worth? 44
- 46. Cash from parents’perspective… We want to eliminate cash Discover Define Develop Deliver 45 Transaction Journey Different perspective on cash Customer Journey
- 47. POSB Smart Buddywas born… A contactless payments ecosystem to cultivate sensible savings and spending habits among young students in an interactive, engaging manner ! 46
- 48. 1.6M Customers in18 months! 90 SEC ACCOUNT OPENING digibank … a bank in a smartphone 47
- 49. = bank branch? digibankOperations Traditional Bank Operations 90% Pushing the boundaries – how far can we go? 48
- 50. • Sharpen acquisitionengine with MVP1 • Test launch in 2 cities • Rapid iterations using Agile methodology • digibank brand launched with Digor and Sachin Tendulkar • Payment products (UPI, Bharat QR) • Investment and Insurance products • Lending products • Remittance products Test MVP1 with liability & payment platform to build scale Build out full value proposition (Q4’15 to Q2’16) (Q3’16 onwards)Phase 1 Phase 2 Go-to-market strategy digibank India 49
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- 52. Strengthen our people andculture EMBED OURSELVES IN THE CUSTOMER JOURNEY BECOME DIGITAL TO THE CORE CREATE A 22,000 START-UP 51
- 53. What makes a22,000 start-up? Agile Take Risk & Experiment Data-Driven Be a Learning Organisation Customer Obsessed 52
- 54. We have thehighest velocity ATMs in the world … how do we stop them from going “cash-out”? “Highest velocity in the world” * 20,000 transactions per month per machine Average time between cash-outs ▪ 2010 3 months 55 years▪ 2017 53 * Source: ATMIA 2014
- 55. Raw data Training Data -Number of trainings attended - Days of training - Mandatory / Non- mandatory RM Revenue - RM’s monthly revenue dollar in first 8 months Leave Pattern - In initial months - Over several consecutive months Branch details - Branch location Ensemble Business Impact: predictive accuracy 54 Predicting when a salesperson is going to leave
- 56. 1,000 Experiments We set atarget for ourselves… far exceeded that! IMAGINARIUMS API HACKTHATHONS STARTUP XCHANGE INNOVATION BACKYARD 14,800 staff engaged in innovation programmes & more… 55
- 57. Being Agile ▪ Agilebetween business & tech ▪ Agile @ Work… even when we audit ▪ DBS Singapore ▪ DBS Group Audit ▪ DBS Asia Hub 2, Hyderabad Changing the way we work… …to foster collaboration 56
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- 60. Our digital customersdon’t see us as business and technology, they see us as one FUSING OUR DIGITAL DNA TRANSITIONING TO PLATFORM OPERATING MODEL 59
- 61. We got ourpeople to work with industry partners and start-ups to develop innovative mindsets 30+ Business Challenges 100+ Start-ups introduced 500+ Participants in community events Gandalf Scholars Operations Transformation Program Evangelists Speaker SeriesLearning Hour Sandbox Learning Lynda Learning in different ways across the region… transforming into digital bankers 60
- 62. Learn and TeachBack 61
- 63. j VISIBLE OUTCOMES: Digitaltransformation pervasive digibank Tally iWealth Treasury Prism Digital Onboarding BusinessClass POSB Smart Buddy TRANSFORMING THE FRONT END… digibank Virtual Assistant Contact Centre Analytics ATM Analytics Fraud Monitoring HR Analytics on RMs Open API Platform … RE-ARCHITECTING THE BACK END “It is demonstrably the case that digital innovation pervades every part of DBS,from consumer to corporate, SMEs to transaction banking and even the DBS Foundation.” Clive Horwood Editor of Euromoney 62
- 64. So how doesthis translate into Digital Value? 63
- 65. Cost-Income Ratio Income (S$bn) 45.0% 45.4% 43.3% 43.0% 9.6 10.8 11.511.9 Digital accelerated income growth, lowered structural costs, boosting operating leverage Cost-Income Ratio Productivity gains from digitalisation Income growth Lift from digital 64 2014 2015 2016 2017
- 66. P&L for Digitaland Traditional segments based on customer view Traditional Income Profit CIR Cost • Direct • Indirect • Overheads Digital Income Profit CIR Cost • Direct • Indirect • Overheads • Digital and Traditional customers identified based on banking behaviour • Complete attribution of all income streams and costs • Full reconciliation to Group financial statements • Granular data to ensure methodology rigour • Time-tested over three years End-to-end P&L constructed following a set of principles 65
- 67. Traditional Digital 61% 39% ROE 9pphigher ROE 19% 27% T D Income per Customer 2X income per customer x 2.1x T D Cost Income Ratio 20pp lower CIR 55% 34% T D Migrate Superior returns from Digital segment 66
- 68. YOU MANAGE WHATYOU MEASURE: Balanced Scorecard and Management Processes Today:Then: 50% 50% Traditional KPIs Strategic priorities Shareholders Achieve sustainable growth Customers Position DBS as bank of choice Employees Position DBS as employer of choice Geographies Regional businesses Enablers 40% Traditional KPIs 20% Making Banking Joyful 40% Strategic priorities Shareholders Achieve sustainable growth Customers Position DBS as bank of choice Employees Position DBS as employer of choice Drive digitally: • Acquire • Transact • Engage Joyful customers & employees by focusing on journeys, experiences Capture value created from digitalisation Geographies Regional businesses Enablers Regulators Society Regulators Society 67
- 69. We have changedthe way we run our business Acquire Transact Engage Create instant fulfilment – making it easier for customers to use our services Decrease cost Making it easier for customers to buy our products: wider distribution Lower acquisition cost Deliver the right offers, at the right time to increase traction through contextual marketing Increase income per customer 68
- 70. Acquire: KPIs setand tracked across products to drive results Online deposit account openingIncrease digital share of: • New account opening • Banker’s guarantee • Loans Increase subscriptions: • IDEAL – online banking platform ExamplesKPIs Consumer SME Online deposit account openingIncrease digital acquisition share: • Deposits • Cards • Loans • Equity • Unit trusts • General insurance 43% 11% 2014 2017 Digital share of deposits onboarding 32pp 64% 27% 20172014 37pp Digital share of deposits onboarding 69
- 71. Transact: KPIs setand tracked to drive results Migrate transactions to digital: • Cash • Trade • FX Design for “no-ops”: • Cash and trade processing • Loan creation, disbursements and servicing • Account opening and maintenance ExampleKPIs Cross-border payments: Customer-initiatedMigrate transactions to digital: • Deposits • Remittance • Loans • Equity • Unit trusts Consumer SME 2017201620152014 D T 70
- 72. Engage: KPIs setand tracked to drive results Contextual marketing: Drive cross-sell and up-sellIncrease number of: • Digitally engaged customers • BusinessClass members and activities • Visits to DBS websites Increase share of: • Internet banking login frequency • Mobile banking usage Examples to drive ‘stickiness’KPIs Omni: Instant points redemption, budget tracking, etc.Increase number of: • Digitally engaged customers • 30-day, 90-day active customers Improve customer satisfaction: • Internet banking • Mobile banking 2.5x Average spend per Omni user ~S$1bn Incremental deposits 30 Campaigns Consumer SME 71
- 73. Upside in Digitalcustomer base to drive progressively lower CIR 43 Aspiration2017 <40 33 39 2015 2017 50-60 Aspiration Cost-income ratio (%)Digital share of customers (%) 72
- 74. DBS’s ability tooffer granular narration on how digitalisation led to enhanced customer stickiness, higher transaction volumes and lower costs. In a disruptive world, it is probably time for investors to think laterally and overlay a technology coat on DBS. DBS has convinced us on its digital transformation. DBS should be in your Singapore core holdings. CIMB Analyst briefing come and go. It was quite something, then, when a DBS investor day triggered a raft of glowing analyst reports and a 4% jump in the share price. The thing that so enthused analysts is that this appears to be the clearest articulation yet of what precisely a digital strategy means to the bottom line. Euromoney DBS … presented one of the most comprehensive digital strategies of any bank in the world, let alone Asia “The Bank of the Future” Citi DBS is among the rare banks in the region who appears to be taking the challenge head-on with an extensive tech transformation. Bloomberg Intelligence We believe that DBS is among the best- positioned banks to demonstrate quantifiable benefits to drive re-rating… Bernstein Making our mark globally 73
- 75. DBS Transformation: The World’sBest Digital Bank Driving Digital Transformation at DBS The Digital Reinvention of an Asian Bank Rewiring the Enterprise for Digital Innovation: The Case of DBS Bank DBS Bank Fosters a Customer-Led Innovation Culture DBS Bank: Transformation though Strategy Implementation Case studies on DBS’ Digital Transformation 74
- 76. World’s Best DigitalBank 2016 DBS: Top of the Digital Class 2017 Global recognition 75
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