The digital bottom-line

Digitization in banking is not really worth it. There are no tangible outcomes. If you ask for proof, you get a lot of studies but not real facts.

Sounds familiar? This is a fundamental challenge with any innovation. Presenting a new business model my former COO, he asked "Can you show me proof that this works? Why is no one else doing it?" The reason is, of course, that if anyone else was already doing it, it would not have been innovative.

Fortunately, for digital banking this has now changed, thanks to DBS showing it's cards and presenting the bottom-line impact of their digitization journey to date (which also shows by the way that digital banking is not longer an innovation advantage but a business basic).

The bank has long since been at the forefront of innovation in finance, from retail- to private- and corporate-banking. They pioneered Artificial Intelligence to enhance efficiency and turn themselves into a data driven business and even launched their own digital-only, mobile-first "Digibank". Less headline catching perhaps, they are also one of the first banks to truly appreciate that digital innovation is not just about creating an App but transforming your entire company from your Serve Model over your Business Model all the way to your Public Positioning. Hence, unlike the mainstream of today's banks, DBS is among the few successfully following a true digital transformation path (see illustration below)

One of the perhaps most important aspects of DBS' digital transformation is that the bank has remade it's Management Scorecard (part of "People change" in above model) to include "Making Banking Joyful" as a success criterion. Moreover, is one of the only banks to have developed a methodology to measure digital value creation. DBS' CEO Piyush Gupta and CFO Chng Sok Hui presented this framework and it's amazing success during the bank's Digital Transformation Investor Day this November (see below).

Most stunningly, the figures show that today DBS' digital customers are the bank's biggest driver of shareholder value creation. This segment not only grows vastly more than that of traditional customers (23% CAGR vs. -2% CAGR), but digital customers are also about 42% more profitable, delivering 27% ROE compared to 19% from traditional customers, all of this not even taking into account DBS' "Digibank".

This is an impressive achievement of the bank. For everyone else it is a call to action. Ignoring the trends changing banking is not only foolish (and belies the lessons every CEO should have learned from other industries that ignored S-Curves), it will also leave shareholder value lagging behind it's potential. It, however, also means that finally the argument that digital transformation delivers no tangible results and we only have studies but no hard facts to go on, is once and for all null and void!