DBS CFO explains how banks can measure digital transformation success

WHILE most banks view digital transformation as a strategic imperative, some lack the digital maturity required to carry strategies to fruition.

Without clear goals and an understanding of the whys and hows of digital transformation, organizations risk having their plans fail, wasting time and resources.

One way banks can track the health of their transformation journeys is to benchmark it against models that have proven to work.

In Asia, Singapore-based DBS Group is often known as a pioneer when it comes to embedding digital solutions into banking services.

According to DBS Chief Financial Officer Chng Sok Hui, the key to a successful transformation journey is to be sensitive in noticing trends, and to efficiently communicate to others the value of going digital.

She noted that when DBS realized the markets were not giving them an accurate reflection of the digitization work they were doing, they were quick to take initiative in linking the benefits of their digitization efforts directly to profits and losses (P&L).

“We were able to demonstrate that for the most digitizable part of our business, which is the retail and SME business in Singapore and Hong Kong, digital customers had higher income, with a ‘cost-to-income ratio’ that was 20 percentage points lower than the traditional segment”.

Also, when transforming digitally, banks need to rethink their operational metrics.

There are no one-size-fits-all metrics, and banks must recognize that metrics that work for fintechs or competitors may not work for them.

Chng emphasized that a bank analyst is not a technology analyst, and would not be able to efficiently translate metrics such as rate of growth of digital customers, or metrics around conversion, into an adequate valuation model.

Therefore, banks must speak in a ‘language’ that is easy to understand when it comes to their digital projects. DBS communicates its operational metrics in terms of how it can lower its ‘cost-to-income ratio’.

According to Chng, culture is undeniably a key driver of a successful digital transformation.

Hence, banks need to adopt a mindset that revolves around the customer — and this is only possible if it trickles from the leadership and if the organization is flexible enough to embrace change and take risks.

Chng also emphasizes that initiatives must be taken to ensure that the right talent is being acquired, and that a common understanding of the need to deploy technology as a solution to address business challenges is being fostered.

DBS recognizes that change is a concerted effort. Chng mentioned, “As an organization, we learned how to become digital to the core, reminding ourselves that it’s not only the executives at the top, it’s everyone. We changed our agenda accordingly, started customer-journey thinking, and how the customer would actually experience our app.”

Change is no longer a nice-to-have, it is a must. However, it need not be a lonely or painful one.

If successful, it will bring gains to banking institutions, ultimately giving them a fighting chance against up and coming fintechs.

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