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2 Big Ways DBS Group Holdings is Riding the Digital Wave

DBS Group Holdings Ltd (SGX: D05) investing big into digital banking.

In its latest annual report, Singapore’s largest bank said that it had invested $5 billion over the past few years to facilitate a move into the digital sphere. The sizable investment is for good reason. DBS Group said that consumers and small and medium enterprises (SME) that engage digitally provide two times more revenue on average compared to other customers.   

In its latest earnings briefing, DBS Group chief Piyush Gupta outline two big ways that the bank is benefitting from the rise of digital banking.

A wider reach

DBS Group launched a mobile-only digital bank in India a year ago. Gupta said that going digital had one advantage:

“One is distribution and reach. We are focused on India for now. We will start doing Indonesia later this year. In India, we’ve put on a million customers in our first year since we launched [digibank] in April last year.”

“That’s quite substantial. Normally, with a brick and mortar strategy, it would have taken us years to get a million customers.”

To be sure, DBS Group does not expect to make substantial amounts of money from its digital venture yet. However, the bank is benefitting from higher CASA [current account, savings account] deposits. Gupta explained:  

“So far, like most fintechs, we’re not making money.”

“We continue to invest money in marketing and [acquiring] customers. But these customers do come with [account] balances and so Casa deposits from these customers are [gradually] building up.”

“We believe that digital opportunity will allow us to reach customers, both for taking liabilities as well as lending, that we can’t do with our distribution limitations today.”

Digital means more business

DBS Group’s digital efforts are not limited to India alone. Closer to home, Gupta added this comment:

“The second big opportunity is that even in [markets] like Singapore or Hong Kong where we already have customers, it’s quite clear that if customers deal with us digitally, they do a lot more business with us.”

“The data seem to suggest that digitally-engaged customers are giving us almost twice, in some cases two and a half times, the business [of customers] who are not digitally engaged. We get greater customer penetration and share of wallet if the customer deals with us digitally.”

In effect, DBS Group is enabling the customer to engage with the bank through different means, including digital. Higher engagement leads to more revenue to DBS Group.     

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Chin Hui Leong doesn’t own shares in any companies mentioned.