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While many in the global banking sector aspire to more fully embrace digital technology, Singapore-based DBS has raced ahead, and it’s cashing in.

DBS’s share price has outperformed that of local rivals Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB), nearly doubling in the past two years. Its home country’s healthy economy has helped. Singapore’s GDP rose by 3.6% last year, and the housing market is gaining strength. In February, when DBS reported fourth-quarter results, it doubled the dividend. But apart from these factors, DBS’s nimble adaptation to the digital world has given it a real edge.

The clearest example is in DBS’s retail banking in Singapore and Hong Kong, which accounts for 44% of its revenue. Piyush Gupta, CEO of DBS Group since 2009, says the bank divides customers into “traditional” and “digital” types, who do most of their banking online. DBS considers 2.3 million of its 5.9 million retail and small-business customers in Singapore and Hong Kong as digital. Catering to their needs and expectations has been fruitful.

Digital customers are more costly to serve; however, they bring in more revenue – S$3.1 billion versus S$2 billion, accounting for two-thirds of the bank’s gross profit. “If you can digitally engage people, they tend to do more. That’s the bare bones of our thesis,” says Gupta. In fact, The Economist reports, DBS is earning 3.4 times more on mortgages and 2.6 times more on credit cards from customers who prefer digital banking.

In November, DBS launched what it claims is the world’s biggest API platform for banking. To date around 70 partners have connected over 150 apps. The platform allows customers looking at homes on PropertyGuru, for example, to apply for a mortgage with DBS. Chief Innovation Officer Neal Cross describes the platform as a “standard tech-company model”, in the mould of Amazon, Alibaba and the like. For a bank, this level of API banking puts DBS well ahead in fintech trends.

In order to expand abroad, DBS launched an online retail operation called digibank in India in 2016. While it quickly attracted 2 million customers, digibank’s success is yet to be determined: It is not yet profitable, India’s middle class may or may not bloom as hoped, and other banks and tech firms will enter the same space. Gupta sees success in relative terms, pointing out that in “mega markets” like India, Indonesia and China, even a share of 2-3% “would really move the needle for DBS”. In August digibank launched in Indonesia. Vietnam, Hong Kong and mainland China could be next.

One key aspect of DBS’s success in digital banking is that it has stayed ahead of the curve. It started overhauling its processes and technology in 2009, long before it started building a “digital bank” in 2014. Half its computing power is already in the cloud. It has also avoided complacency, despite being the biggest bank in a small, rich economy. Other banks will have to catch up.

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