new creating value from digitalisation · 2018. 3. 22. · 1 creating value from digitalisation...

1

Creating value from

digitalisation

Chng Sok Hui

Chief Financial Officer

March 2018

The presentations contain future-oriented statements, including statements regarding the

Group’s vision and growth strategy in the light of anticipated trends as well as economic

and market conditions. Such statements necessarily involve risks and uncertainties,

which may cause actual performance in future periods to differ from projections.

Agenda

Our digital strategy01

Changing the way we run our business – Making

Banking Joyful04

Digital segment demonstrates clearly superior financial

and operating metrics03

Robust and well-tested methodology to understand

customer behaviour and measure financial impact02

2

EMBED

OURSELVES

IN CUSTOMER

JOURNEYBECOME DIGITAL TO

THE CORE

CREATE A

24,000-PERSON

START-UP

Driving the transformation: Making Banking Joyful

Make DBS ‘Invisible’

The three pillars driving the digital transformation to

Make Banking Joyful

3

World’s Best Digital Bank

2016

Top of the Digital Class

2017

Global recognition

for pervasiveness

of transformation

Our digital business model: 5 key capabilities

ECOSYSTEMS: Pipes to Platforms

DATA: Be insights driven

TRANSACT

• Eliminate paper, create instant

fulfilment

• Decrease cost

ACQUIRE

• Increase customer acquisition

through wider distribution

• Lower acquisition cost

ENGAGE

• Drive ‘sticky’ customer

behaviours, cross-sell through

contextual marketing

• Increase income per customer

The five key capabilities of our digital banking model

4

Today:Then:

50%

50%

Traditional KPIs

Strategic priorities

Shareholders

Achieve

sustainable

growth

Customers

Position DBS as

bank of choice

Employees

Position DBS

as employer

of choice

Geographies Regional

businesses

Enablers

40% Traditional KPIs

20% Making Banking Joyful

40% Strategic priorities

Shareholders

Achieve

sustainable

growth

Customers

Position DBS as

bank of choice

Employees

Position DBS

as employer

of choice

Drive digitally:

• Acquire

• Transact

• Engage

Joyful customers

& employees by

focusing on journeys,

experiences

Capture value

created from

digitalisation

GeographiesRegional

businessesEnablers

Regulators Society

Regulators Society

5

You manage what you measure:

The balanced scorecard and management process

5

Cost-Income

Ratio

Income

(S$m)

Digital has accelerated income growth and lowered structural costs,

boosting operating leverage

Cost-Income Ratio

Productivity gains from digitalisation

Income growth

Lift from digital

6

1 Corporate Bank, Private Bank, Markets, and Others

Pre-empt disruptorsConsumer and SME

(Singapore,

Hong Kong)

Disrupt incumbentsConsumer and SME

(Growth Markets)

Digitalise for profitabilityOther Businesses1

Measuring the

digital value created in:Our agenda

7

Unbundling the bank

2017 income: S$11.9bn

44%,

S$5.2bn52%,

S$6.2bn

5%,

S$0.5bn

44% of the bank: High performing and rapidly digitalising business

Consumer and SME (Singapore, Hong Kong)

• Rapidly transforming to digital

• Gaining market share, creating new income streams

• #1 in Singapore in mortgage, auto loans, cards1

S$5.2bn

2017 income: S$11.9bn Pre-empt disruptors

38% (2015)

44% (2017)

12% CAGR

vs Group: 5%

49%2015

44%2017

Cost-income ratioIncome

22%2015

23%2017

ROE

• Jewel in the crown

• Likely to grow income at double-digit

• Has potential to contribute ~50% of the bank’s income in 5 years

8

Agenda



Banking Joyful04





9

First bank to develop methodology to measure digital value creation


We have been progressively helping

our customers adopt Digital behaviours

The Digital segment is growing faster,

with superior ROE

Digital

• 27% CAGR

• 27% ROE

Traditional

• -4% CAGR

• 18% ROE

44%• 12% CAGR

• 23% ROE

CAGR refers to 2015-2017 income

2017 ROE adjusted for accelerated provisioning in SME; without adjustments, 2017 ROE is 20% overall, 15% for Traditional segment and 23% for Digital segment

2017 income

49%

(2015)

63%

(2017)

Two distinct segments based on

customer behaviour

• Digital (D): predominantly online /

mobile interactions

• Traditional (T): predominantly offline

interactions

10

For each customer, all

associated income and

all associated costs are

completely and

accurately attributed

Robust, well-tested methodology based on customer behaviour

Three behavioural criteria for “Digital customers”

Product purchase

or segment

upgrade via

digital channels

More than 50% of

financial

transactions via

digital channels

More than 50%

of non-financial

transactions via

digital channels

1 2 3

• Account opening

• iWealth

• DBS Remit

• Pay bills online

• Add / delete payee

• Change personal

details

OR OR

Customers must re-qualify on a rolling 12-month basis

11


P&L for Digital and Traditional segments based on customer view

Traditional

Income

Profit

CIR

Cost• Direct

• Indirect

• Overheads

Digital

Income

Profit

CIR

Cost• Direct

• Indirect

• Overheads

• Digital and Traditional customers

identified based on banking behaviour

• Complete attribution of all income

streams and costs

• Full reconciliation to Group financial

statements

• Granular data to ensure methodology rigour

• Time-tested over three years

End-to-end P&L constructed

following a set of principles

12

Agenda



Banking Joyful04

Digital segment demonstrates clearly superior

financial and operating metrics03



13

Superior returns from Digital segment

2017 profit and loss (S$bn) Total T D Digital is material

Customers (m) 6.0 3.5 2.5

42% of customers contribute

63% of income and 72% of

profit before allowances

Income 5.2 1.9 3.3

Costs 2.3 1.1 1.2

Profit before allowances 2.9 0.8 2.1

Key indicators Digital is more valuable

Income per customer (S$’000) 0.9 0.6 1.3 2X income per customer

Cost-income ratio (%) 44 58 36 22pp lower CIR

Return on equity (%) 23 18 27 9pp higher ROE

2017 ROE adjusted for accelerated provisioning in SME; without adjustments, 2017 ROE is 20% overall, 15% for Traditional segment and 23% for Digital segment 14

Key indicators Differential over T Digital increasingly valuable

Income per customer (S$’000) 1.1 1.3 2X 2X Higher income per customer

Cost-income ratio (%) 40 36 -18pp -22pp Lower CIR

Return on equity (%) 25 27 +8pp +9pp Higher ROE

Consistently superior returns from Digital segment over time


2015 2017 2015 2017

Profit and loss (S$bn) D D Share of total (%) Digital increasingly material

Customers (m) 1.9 2.5 33 42

Income 2.0 3.3 49 63

Costs 0.8 1.2 40 51

Profit before allowances 1.2 2.1 58 72

Strong growth momentum

– driven by customer

migration and uplift in

income per customer

15

33

49

58

37

55

64

42

63

72

0 10 20 30 40 50 60 70 80

Profit before

allowances

Customers

Digital share (%)

Income

42% of customers contribute 72% of profit before allowances

2015

2017

2016

+14pp

Digital share of customers, income and profit before allowances

+14pp

+9pp

16

Agenda



Banking Joyful04





17

We have changed the way we run our business

Acquire

Transact

Engage

• Create instant fulfilment – making it easier for customers to use our

services

• Decrease cost

• Making it easier for customers to buy our products: wider distribution

• Lower acquisition cost

• Deliver the right offers, at the right time to increase traction through

contextual marketing

• Increase income per customer

18

Acquire: KPIs set and tracked across products to drive results

Online deposit account openingIncrease digital share of:

• New account opening

• Banker’s guarantee

• Loans

Increase subscriptions:

• IDEAL – online banking platform

ExamplesKPIs

Consumer

SME

Online deposit account openingIncrease digital acquisition share:

• Deposits

• Cards

• Loans

• Equity

• Unit trusts

• General insurance

45%

11%

2014 2017

Digital share of deposits onboarding

34pp

60%

27%

20172014

33pp

Digital share of deposits onboarding

For SME, digital share of deposits onboarding refers to IBG 4 addressable base (excluding niche segments) in Singapore and Hong Kong; IBG 3 excluded due to dedicated RM model 19

Transact: KPIs set and tracked to drive results

Migrate transactions to digital:

• Cash

• Trade

• FX

Design for “no-ops”:

• Cash and trade processing

• Loan creation, disbursements and servicing

• Account opening and maintenance

ExampleKPIs

Cross-border payments: Customer-initiatedMigrate transactions to digital:

• Deposits

• Remittance

• Loans

• Equity

• Unit trusts

Consumer

SME

2017201620152014

0.5

1.7

6.3

0.4

2.9

0.4 0.3

D

T

4.5

Volume of transactions (m)

20

Engage: KPIs set and tracked to drive results

Contextual marketing: Drive cross-sell and up-sellIncrease number of:

• Digitally engaged customers

• BusinessClass members and activities

• Visits to DBS websites

Increase share of:

• Internet banking login frequency

• Mobile banking usage

Examples to drive ‘stickiness’KPIs

Omni: Instant points redemption, budget tracking, etc.Increase number of:

• Digitally engaged customers

• 30-day, 90-day active customers

Improve customer satisfaction:

• Internet banking

• Mobile banking (digibank)

2.5xAverage spend

per Omni user

~S$1bnIncremental deposits

31Campaigns

Consumer

SME

21

SME

Digital customers: Highly engaged; multiple times more transactions…

3

58

17x

DT

Customer-initiated transactions per customer, 2017

Offline channel

Online channel

8x

402

53

DT

Consumer

For Consumer, financial transactions include fund transfers, remittances, bill payments, deposits, cheques, and investments and insurance, excludes ATM; non-financial transactions

include call centre and other account services.

For SME, financial transactions include FAST, MEPS, RTGS, TT, GIRO, cash, cheques, ACT, PRIME, trade, factorpro, DOL, etc. excludes H2H due to bulky volumes; non-financial

transactions include IDEAL enquiries and Bizcare

Customers (’000)3,390 2,456 92 90

22

Consumer: Consistently higher income from broad-based engagement

Income per customer 2x 2x2x

2015 2016 2017

Deposit balance

Loan balance

Investment balance

Products

Multiple over T

1.7x Other lending

Mortgages

D

826

403

2.7x

T

Deposits

Wealth & others

1.4x

3.5x

2.4x

Credit cards

Income per customer excludes lump-sum income not tracked at customer level

2017

2.0x

3.8x

1.4x

1.7x

23

SME: Consistently higher income from broad-based engagement

2x 2x2x

2.7x

1.4x

4.1x

3.1x

Trade finance

Cash

management

D

5,164

Loans

T

11,852

Treasury

Deposit balance

Loan balance

Products 1.7x

2.8x

1.3x

2017

Income per customer

2015 2016 2017Multiple over T

Income per customer excludes lump-sum income not tracked at customer level 24

• Existing Digital customers (D): Faster income growth

• Newly migrated Digital customers (T to D): Also show faster income growth

Digital customers: Consistently faster growth in income per customer

% of customers

Consumer SME

Relative income growth for same customer cohort, 2017 v 2016

56 37 760 32 8

Moderately slower than overall Faster than overallSlower than overall

T D T to D

Total

Deposits

Mortgages

Credit cards

Other lending

Wealth and others

T D T to D

Total

Loans

Trade finance

Treasury

Cash

management

1 2 1 2

2

1

25

Upside in Digital customer base to drive progressively lower CIR


43

Aspiration2017

<40

3339

2015 2017

50-60

Aspiration

Cost-income ratio (%)Digital share of customers (%)

Customer base as of Jun 2017; other 2017 figures annualised based on 1H17, where applicable 26

new creating value from digitalisation · 2018. 3. 22. · 1 creating value from digitalisation...

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