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Asia300

Indian spirit animates Singapore bank DBS' digital strategy

MAYUKO TANI, Nikkei staff writer | India

SINGAPORE -- Piyush Gupta, CEO of DBS Group Holdings, has a tall order to fill. He must transform the bank he runs from top to bottom -- its culture and ways of doing business -- to survive the digital revolution and competition from new players outside the banking industry.

     To do that, Gupta is looking to his roots in India.

     "How do you change [your people] so that they think like employees in Apple and Facebook?" Gupta asked a gathering of reporters at a luncheon in August last year. "You can't do that in a room, presenting on a whiteboard. You have to create a platform so people have a chance to engage, dirty their hands and work with different kinds of people. We have been massively involved in last two years trying to change the culture" of DBS, he said.

Not your father's banker

One step he took was to set up a "hackathon." DBS employees and technology entrepreneurs got together for five days in April to help his employees develop a "digital mindset." By being exposed to people who have started their own tech businesses, Gupta hoped to impart creativity to his staff.

     The hardest part of leading the Singaporean bank into the digital future is changing the way people who work there think. Banking is by nature a conservative business, and close to 30% of the shares of DBS are owned by the government. Prudence is a core value. Named Asia's safest bank for seven years in a row by Global Finance magazine, entrepreneurial risk-taking simply may not be in the institution's DNA.

     It will be a long struggle. Gupta sometimes walks into a branch posing as a customer. He wants to understand how the customer experiences the bank and why the lines at the counter are so long, for instance. But it is easier to eliminate bottlenecks in service than it is to transform a bank's culture.

Big thinker

Gupta, who became a citizen of Singapore in 2009 after living in Southeast Asia for two decades, is a regular face at high-level forums. On Sept. 19, he sat comfortably opposite Prime Minister Lee Hsien Loong, moderating a discussion that ranged from the economy to international issues to politics at the government-led Singapore Forum. A couple of days earlier he was discussing the global economy with Michael Milken, the "junk bond king"-turned-philanthropist.

     One of Singapore's most prominent opinion leaders, Gupta is bullish on Asia's long-term prospects, especially China's, although he warns the current slowdown will cause choppiness in the region for the rest of year. Lately he has shifted his attention to India, where his big push for digital banking is underway.

     "Cataclysmic disruption" coming from digital technology will hit banking industry hard, Gupta has been saying since early this year. He is preparing to meet the challenge head-on. A digital bank, "a bank in a mobile phone" as he puts it, will be completely electronic and paperless; it will not require physical branches. DBS is trying out the concept in India first, and will begin offering services there late this year or early in 2016.

     Gupta was born in India and got his undergraduate degree from Delhi University's St. Stephen's College and a postgraduate diploma in management from Indian Institute of Management, Ahmedabad, two prestigious institutions. He began his career at Citibank in India, though he harbored dreams of becoming a diplomat, according to an interview in Forbes magazine. He climbed the ladder at the U.S.-based multinational bank, taking key positions in Indonesia, Malaysia and Singapore. Before moving to DBS in 2009, Gupta was CEO of Citi's Southeast Asia, Australia and New Zealand operations.

Proving ground

There is one break in Gupta's career as a banker. In 2001, at the height of dot.com boom, he left Citibank to set up an Internet portal called Go4i.com in a tie-up with the Hindustan Times, one of India's largest newspapers. "Turning 40, I decided to leave banking and take the entrepreneurial plunge," he wrote in an article for social media site Linked-in. "Everyone was caught up with Internet fever and it seemed like India could do with another portal."

     The business did not pan out. "Just five weeks later, the dot.com bubble burst and money from venture capitalist firms dried up," Gupta said. He ended up going back to Citi, but, he said, "The experience did an important thing for me. It freed me of my inhibitions, it took me off the treadmill, it created a sort of freedom in my thinking process and my decision-making that I did not have before."

     Gupta's entrepreneurial spirit is driving DBS' digital strategy. Digitization has been his mantra for at least the last two years. It is not just a matter of making traditional banking services available on the Internet or mobile phones, but "digitizing the whole bank." To make that happen the company has to reimagine the way it operates, shifting away from analog methods.

     The shift toward digitization is partly defensive, but Gupta is playing to win. "Banks in Asia are on a burning platform of competition from mobile and Internet companies. If we don't embrace digital, and quickly, there is a real danger that our lunch will be eaten," he said. Technology giants and fintech companies like Apple, Google, and PayPal, as well as many startups, offer payment and investment services. Alipay, the payment arm of Alibaba, China's largest e-commerce company, allows people to shop easily online; it also lets them pay their bills and invest.

    In six years under Gupta's leadership, DBS has spent about 5 billion Singapore dollars ($3.6 billion) on digital technology, including development of core systems, analytic capabilities and applications. The bank has been rolling out a range of services in Singapore, including mobile wallets and online loan application for small businesses.

     To skeptics who ask why India is serving as the bank's test bed, Gupta's answer is crisp: "Look at India's take-up of mobile phones and the growth in social media and e-commerce in the past 18 months." His confidence comes from firsthand knowledge of the Indian market and society. Gupta reckons Indian consumers are ready to embrace digital banking.

     Gupta's pivot to India coincides with and is a response to China's slowdown and the bank's heavy reliance on that market. DBS's loans in greater China made up 36% of its total portfolio as of the end of 2014, a significantly larger share than its two domestic rivals, United Overseas Bank and Oversea-Chinese Banking Corp.. Following an expensive takeover of a Hong Kong bank in 2001, DBS has steadily increased its China exposure, especially after European banks scaled down their Asian business in the wake of the 2007-08 financial crisis. As China's economy loses steam, expanding in India will give the bank much-needed geographical balance and a future stream of revenue.

     If the strategy proves successful in India, DBS will probably replicate it in other big markets such as China and Indonesia. Digital services are key to the bank's overseas expansion plans. It is avoiding acquisitions, which are costly and face many regulatory hurdles.

     This was a lesson learned from bitter experience in 2013, when DBS had to abandon an attempt to buy Bank Danamon in Indonesia. The country imposed new ownership rules that blocked DBS from taking a majority stake. Gupta at that time said it would take DBS about five years to build an Indonesian business to get to the level it would have had with Danamon. A digital bank could shorten that time frame considerably. In retrospect, Gupta sees acquisitions as a bad way to grow, calling them "yesterday's story."

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