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How Has Digitalisation Improved DBS Group Holdings Ltd’s Business?

In recent years, financial services have been made more accessible with digitalisation. For example, with apps such as PayNow!, and DBS Group Holdings Ltd’s (SGX: D05) PayLah!, users can transfer money to their friends, pay their bills, or even send digital gifts with a simple click of a button.

Digitalisation has, without doubt, improved users’ experience with financial services. But, it has also come at a cost to banks as they have to invest sizeable amounts of capital to integrate technology into their business.

With DBS one of the forerunners of digitalisation in the financial space in Singapore, I wanted to see if its hefty investments – the bank had spent S$5 billion on technology over the five years ended 2016 – have actually paid off.

Growing its market share

Through its digital strategy, DBS has managed to gain share in both the consumer and institutional markets in its key geographies of Singapore and Hong Kong.

According to DBS’s 2017 annual report, around 37% of new wealth banking clients started their relationships with the bank online, and 80% of new SME (small and medium enterprises) account openings were initiated online. This trend suggests the importance of online platforms in growing DBS’s marketshare.

Expanding its global reach

Digitalisation has also enabled DBS to broaden its global footprint and expand into high growth markets without having to spend on expensive physical distribution networks.

This is illustrated by the success of DBS’ launch of digibank in India. digibank is India’s first mobile-only bank, and has already signed on over 1.8 million customers after being launched on April 2016. DBS has also introduced digibank in Indonesia to tap into the growing South East Asian market.

Digitalisation has allowed DBS to expand its geographical footprint to China as well. Chinese customers can access DBS’s online banking services by an onboarding process through the popular mobile app, WeChat.

Improving its efficiency

In addition to reducing manual processes, digital innovation has also increased productivity and enhanced cost efficiencies at DBS.

For instance, DBS has an app called the CYCLE tool, which enables the bank’s relationship managers to have a full view of a customer’s life stage, investment patterns, and lifestyle preferences. This tool has improved the productivity of the bank’s relationship managers as it enables them to focus on their clients’ impending needs.

Digitalisation has also lowered customer acquisition and transaction costs. Together with other cost management initiatives, digitalisation contained DBS’s expense growth to just 3% in 2017, which is lower than its total income growth of 4%.

The Foolish bottom line

Technological enhancements have certainly taken the world by storm. DBS has done very well in reinventing and positioning itself well for the future. Despite it still being early days in the digitalisation of the financial industry, the capital spent on going digital has already started to reap returns for DBS.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has a recommendation on DBS Group Holdings. Motley Fool Singapore contributor Jeremy Chia owns shares in DBS Group Holdings.