16 December 2016
Leslie Holstrom speaks to John Laurens, Group Head of Global Transaction Services, DBS
What are the top three client-side trends in transaction banking that you are focusing on?
Transaction banking services will be a major driver of change that will take place in the wholesale banking space, particularly in the area of digitisation. Corporate treasurers are beginning to embrace digital banking solutions to drive greater efficiency and improve their cash conversion cycles. FinTechs are delivering fresh perspectives and ways of doing business with corporate treasurers, from online solutions to real-time diagnostics. Banks will need to innovate to remain competitive and deliver seamless and integrated digital experiences by applying new technologies that can eliminate inefficiencies and reduce complexities for corporate treasurers.
FinTechs – It’s increasingly evident that emerging financial technology will change the face of banking, taking the customer’s experience and interaction with banks to another level. DBS has been very progressive in this regard. Across various parts of the bank, we have extensive engagement with the FinTech community, from mentoring to partnering. This experience is playing an important role in developing the thinking of our people and influencing how we shape our product design and the experience of our customers. For example, our transaction banking product development programme now features human-centred design thinking, open architecture software and cloud-based platform development.
Blockchain technology – We are also working in collaboration with Standard Chartered Bank and the Infocomm Development Authority of Singapore to experiment with the development and application of distributed ledger, or blockchain technology, to potentially redefine aspects of transaction banking, from the legacy trade business to payments. DBS has also established a cutting-edge big data analytics programme to reduce trade fraud, by leveraging big data technology to detect abnormal activities in the trade finance space.
Digitising processes – The digital era is changing the way in which our customers operate and how they interact with their business partners. To contribute in more meaningful and useful ways for corporate treasurers, DBS is digitising traditionally manual processes and providing more solutions in the digital space. Some solutions for transaction banking include cloud-based banking and robo-advisory.
What are the top 3 trends that are affecting the banking sector and how are those effects manifesting themselves?
There has been some progress in the area of dematerialisation of trade over the last few years, with new electronic solutions in the market that offer alternatives to paper modes or manual transactions. While these deliver greater efficiency, adoption rates have been low and there are still areas that are heavily reliant on paper documentation. While new technology such as distributed ledger technology could provide the much-needed break to materially alter international trade processes, it will be a few years before we see substantial progress. This is particularly true for Asia, where the markets are not homogeneous and regulators play an influential role in shaping the industry.
The global economy slowdown has taken a toll on the banking industry. Some global banks are retreating to their home markets due to various issues such as risk remediation, while some of the local banks continue to focus on their domestic markets. This has resulted in a rise in demand for regional banks with an international outlook by companies who are looking to expand within the region, especially in Asia.
The changing regulatory landscape continues to pose challenges for banks, with heightened awareness around fraud and cyber-security.
How are these client-side and bank-side trends affecting the way you offer and price your services?
At DBS, we place the customer at the centre of everything that we do. We apply human-centred design methodology to study the customer journey across the multiple touch points within the bank, to deepen our understanding on the customer-bank interactions and address the customers’ needs. This single-minded focus on the customer will ensure that we remain relevant to our customer needs and enables us to deliver joyful experiences to the customer.
The bank is making great strides in its digitisation efforts, truly challenging the conventional boundaries of banking and reinventing the customer-bank interactions. Our digibank in India is one such example, where it introduced ground-breaking artificial intelligence technology and incorporated biometric identification technology into the service. We continue to be at the forefront of innovation, leading the charge in the transformation of banking across various customer segments. For instance, we are working with accounting providers to redefine banking services for SMEs and exploring cloud-based banking activity platforms with the use of graphical interfaces. We are sandboxing these digital initiatives and inviting customers to experiment with new solutions.
DBS also works closely with local regulatory bodies and industry leaders to formulate policies and establish national infrastructures. For example, DBS led the formulation of the Monetary Authority of Singapore (MAS) guidance on Anti-Money Laundering and Countering Financing of Terrorism Controls in Trade Finance and Correspondent Banking (AML CFT), released in October 2015. DBS also took the lead in sharing our trade finance expertise and risk screening processes for the National Trade Infrastructure (NTI) project in collaboration with Infocomm Development Authority and various government agencies including MAS. DBS has made considerable progress in China as well. In 2015, DBS was the only Singapore bank to be a participating member of China’s Cross-border Interbank Payments System (CIPS), the only foreign bank invited to join the Shanghai International Energy Exchange (INE), as well as one of the few foreign banks to obtain license to operate in the Shanghai Free Trade Zone.
In particular, how have you altered your product mix, your pricing and which regions/countries you offer your products? How have these changes been received by your clients?
One of DBS’s key value propositions is being a leader in the digital space. We are progressively working on cutting edge solutions for our clients across various units of the bank. For example, in the SME space, DBS has pioneered several industry-first digital solutions, such as online and virtual account opening services, online bankers’ guarantees and DBS BusinessClass, a mobile app that helps start-ups and SMEs seek business advice and opportunities across Asia. These solutions are geared towards simplifying banking services and providing seamless solutions, enabling them to spend more of the time on their business and customers. Moving forward, DBS is also working with accounting providers to offer integrated accounting and banking services on an integrated platform, empowering SMEs with the ability to manage their finances seamlessly.
In our discussions with corporate treasurers from Western MNCs, they have expressed a desire to change the strategic construct of their bank group to reflect their business activity. Asia typically represents a significant part of the business for the Fortune 500 names, and an Asia-parented bank can fit the criteria of their bank group. As a leading bank in Asia, DBS is a natural fit. With the bank’s strong balance sheet and connectivity in Asian markets, this enables us to support the Asian ambitions of these corporates.
Are you finding that internal technology issues (silos, legacy systems, unavoidable complexity) create a disadvantage in competing with FinTech companies?
DBS has the benefit of being big enough to have meaningful scale and yet nimble enough to quickly identify and act on opportunities. We are deeply rooted within the FinTech community and this is evident in our participation in hackathons, mentorship programmes and playing a leading role in connecting these FinTechs and their solutions into the financial infrastructure. Through our close relationships with the FinTech community, DBS is in a good position to identify possible collaborations to implement cutting-edge solutions that deliver integrated and seamless banking experiences for our customers.
Now that so many FinTech companies have secure, interesting and fast products, what do you see happening to banks in the corporate space?
Banks are the conduit between the FinTechs and financial infrastructure, as well as between corporates and financial solutions. Hence, banks will naturally remain as industry drivers for financial technology, given their role in the ecosystem as well as domain knowledge in financial solutions. Going forward, banks will also be adopting new technology to transform the financial services landscape as online and mobile banking become ubiquitous.
In addition, working with regulators, banks can influence the industry creation of new financial solutions as well as technology adoption and as a result deliver greater value to corporates.
How far out do you see FinTech companies being regulated more in line with banks?
Technology, such as blockchain, with which the FinTech community has been working with for some time is still in its early days insofar as the financial services industry is concerned. To see broad adoption of such technology in financial services, a range of issues such as standardisation, scalability, systems latency and identification of participants will need to be addressed. Regulators will play a role in this regard as the adoption of technology progresses. It will take a few years before we see any material impact on the regulation of FinTech companies.
Treasurers are now extremely cybersecurity conscious. Is this having any effect on your transaction management business? What about the so-called 'SWIFT hacks'?
At DBS, we uphold the highest standards of security possible, by being progressive in delivering cutting-edge solutions that make use of data analytics to spot anomalies in customer transaction patterns such as transaction monitoring, investing in relevant technology, as well as ensuring security controls and protocols are in place. In addition, we provide customers with educational information on cybersecurity to help them stay informed and vigilant.
What are your views on challenger banks? They have traction in the retail market, but what do you expect for the corporate market?
There has been an extraordinary amount of focus and conversations around digitisation. Two years ago, banks were focused only on issues of regulation. Today, conversations revolve around technology and digital, the threat and the opportunities. Many of our global competitors tend to approach this agenda in a specific silo, either in the technology group, the innovation group or in a separate silo created in the bank. DBS is well ahead in this journey, we have a comprehensive bankwide agenda across the front-end, as well as transforming back and middle-office automation. We are also principally committed to the customer’s journey and re-imagining the nature of banking in unique ways.