If you embed that into the KPIs and scorecards that everybody’s measured by—and make sure it’s continually reinforced from the CEO and the leadership team down—then you get results and can shift and move. And we said to ourselves, “If we want to be digital to the core and act like a technology company, it’s best we learn from the technology greats, figure out how they do it and see if we can’t bring in some of those things internally.”. We learned a few things along the way. Banks are racing to take advantage of market opportunities available through digital transformation. So, we started with a lot of change agenda items. Furthermore, participation by senior management … The technology is available to digitize more retail-like functions, such as relatively simple documentation and simple deals, and often a commercial bank can leapfrog using a retail bank’s experience with digital transformation. One successful example would be a bank offering we did in India. And the markets were not giving us a valuation that was reflective of the work that we were doing. Without those clear missions, we’d have had people going in all sorts of different directions. We believe we were the first bank to make this effort to link the methodology of how we demonstrate digitalization efforts and link them directly to the P&L. business management consulting firm McKinsey & Company, 70 percent of banks have digital risk “prominently on their radar.”1 RSA believes the critical question is whether FIs will confidently pursue the opportunities digital transformation presents, or focus instead on the risk it creates. The McKinsey survey found that the COVID-19 pandemic has significantly accelerated the pace of adoption of digital transformation technologies, as well as … There is no doubt new digital technologies are changing the banking industry. Join to Connect Axis Bank. Never miss an insight. Vice President - Digital Banking and Transformation at Axis Bank | Ex-McKinsey Mumbai Area, India 500+ connections. Open Banking, Expanded Opportunities. Today, the … The third was changing the culture of the company to make it feel and operate like a 22,000-person start-up. Once you do that, you can start to think about how you really start to accelerate and become nimble, accelerate speed to market, and increase your cadence. Taking a page from some of the larger digital businesses, banks can … cookies. The middle part is where the core of the digital transformation comes in, and we ascribe 20 percent of the value of the scorecard to this, which is then used to drive compensation for the company. Welcome to The Finanser by Chris Skinner. At the same time, they must manage the risks created by the new digital economy. We'll email you when new articles are published on this topic. Unleash their potential. We'll email you when new articles are published on this topic. Instead, digital transformation means becoming digital to the core, pushing customer-journey thinking throughout the organization, and modernizing the organization’s culture. The ABC of CBDCs. It got them to think, “We’re not acting like another bank, and here’s how we really start to transform ourselves like a technology company.”. Learn about So you have to balance it. January 9, 2020Singapore-based DBS bank has earned multiple “best bank” titles, from publications including Euromoney, The Banker, and Global Finance. Learn more about cookies, Opens in new Learn more about cookies, Opens in new all these are good metrics. Chng Sok Hui: We have been running this digital value creation metric coming to five years now, and I think the value that I can see out of this is that the businesses themselves are very passionate about it. We were able to demonstrate that the digital segment had cost-to-income ratio that was about 34 percent—20 percentage points lower compared to the traditional segment of 54 percent. Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. The bank is widely cited as being in the vanguard in terms of embedding digitization across the full range of banking processes and services. A shift to digital use of this magnitude would probably have taken at least a couple of years without the Covid-related branch closures, according to McKinsey. So, test and learn, test and learn, test and learn was the only way we could get into a brand-new market with a product that we had simply no idea how it was going to operate when we launched it. And the way we balance it is through group scorecards, which really drive everything we do and clearly indicate to people the amount of time we expect them to spend on certain areas. Reinvent your business. Now that might sound a little cheesy, but in actual fact, it was an amazing rallying call to our people. In fact, almost everyone had to go through a process of coming up with an app. The first thing is that most of these technology companies started much like where we are today. In 2017 David became the first CIO from an Asian company to receive the prestigious Massachusetts Institute of Technology (MIT) Sloan CIO Leadership Award. Chng Sok Hui: The way it started is the realization that we were not just a bank, we were becoming a technology company. We came up with a mobile-only offering. If you focus purely on digital and forget the organizational change you have to make, you won’t get very far. We were actually pushing out releases weekly into the app store. And we remind ourselves that it’s not only the executives at the top, that it’s not just the IT folks, that it’s not just the business folks, it’s everyone. How do you build infrastructure engineering? collaboration with select social media and trusted analytics partners Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more. It’s a collective and collaborative thing to come up with each person’s scorecard and the weightings of those. I remember we had human-centered design thinking. So those five elements became the mission that we’re on and the delivery pipeline that we started to build. They had big systems. I’d say you really need to boil down the essence of what your mission is and what the problem is that you’re trying to solve. Change, that is, that applies to: Subscribed to {PRACTICE_NAME} email alerts. Once that’s set for the year, it’s very clear what everyone’s mission is. There is a critical need for affordable computing platforms that provide greater agility. We came up with five key elements that had to change. Solutions considered ahead of … No idea. Digital upends old models. Digital transformation is a Trojan horse. Chng Sok Hui: The key is to be able to translate operational metrics. The first letters of Google, Amazon, Netflix, Apple, LinkedIn, and Facebook together spell GANALF. The other learning for us, and perhaps the thing that was most difficult, was that we had to learn how to learn. In an interview with McKinsey’s Joydeep Sengupta, Chng Sok Hui, Chief Financial Officer of DBS, discusses how mindsets and culture are just as important as technology for a digital-forward bank. Select topics and stay current with our latest insights. 10 hours ago. People create and sustain change. cookies. hereLearn more about cookies, Opens in new Use minimal essential Transformation could consume every hour of every employee in the company for the next five years. Please use UP and DOWN arrow keys to review autocomplete results. As head of Group Technology & Operations at DBS, David manages about 10,000 technology and operations professionals across the region and is focused on making banking simple and seamless for DBS customers by changing the company’s internal culture, re-architecting its technology infrastructure, and leveraging big data, biometrics, and AI. So what’s the difference in your approach versus what the other banks are doing? The core group building the digital bank should have a solid understanding of not just the new technology architecture, but also of the bank’s design and brand and the economics of its business model. hereLearn more about cookies, Opens in new David Gledhill is the Chief Information Officer for DBS Bank. Below that we have the strategic initiatives we need to get done, and that’s another 40 percent. Then you fund the platform, look at what outcomes that platform can give, and set it free. Digital transformation is complex and means different things to different people, she adds. The second was: how do we embed ourselves in the customer journey and push customer-journey thinking throughout the organization? Narsee Monjee Institute of Management Studies . Digital and analytics Bank of the future One is how we digitized to the core. McKinsey data shows that the accelerated shift towards digital channels in banking is likely to … Digital transformation has become a matter of survival. collaboration with select social media and trusted analytics partners Create a financial supermarket. Press enter to select and open the results on a new page. People create and sustain change. According to a McKinsey report on ‘The people power of transformations’, 70% of digital transformation projects fail due to a lack of employee engagement. So if they’d done it, we could do it. Why hasn’t digital transformation in banking gone far yet? We use cookies essential for this site to function well. In a digital driven bank or credit union, digital is treated as a … So you’d have these meetings and people would ask, “How could we possibly not have known that?” Well, it’s an experiment. Press enter to select and open the results on a new page. When we were thinking about the digital transformation of DBS, we saw three key elements as vitally important. Please click "Accept" to help us improve its usefulness with additional cookies. . Chng Sok Hui: I think we needed to learn how it is that we can become digital to the core, but I think that we also need to learn how to change in terms of our own mindsets and in terms of the organization culture. Finally, how do you automate everything from testing through deployment to increase cadence? “Digital transformation for the top banks is focused on improving data and customer experience, as well as operational efficiency. Our flagship business publication has been defining and informing the senior-management agenda since 1964. For example, our DBS remittance product: it’s fully digital, and therefore whatever additional customers you acquire, additional number of transactions, actually the benefits flow through to the bottom line. Please use UP and DOWN arrow keys to review autocomplete results. tab. McKinsey senior partner Joydeep Sengupta, leader of McKinsey’s Strategy, Organization, and Corporate Finance Practice, sat down with Chng Sok Hui, DBS’ Chief Financial Officer, to discuss the bank’s approach to digital transformation. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. Prior to joining DBS in 2008, he spent 20 years at JP Morgan, holding senior regional positions in Technology & Operations. Please try again later. Learn about Back to Banking & Securities matters Becoming more than a bank: Digital transformation at DBS In an interview with McKinsey’s Joydeep Sengupta, Chng Sok Hui, Chief Financial Officer of DBS, discusses how mindsets and culture are just as important as technology for a digital-forward bank. But when you get into this new digital space of experimenting with ecosystems, with start-ups, with launching a brand-new product that nobody’s ever tried in a new market, you get lots of things wrong. It was very clear, something people could act on, and that drove massive change through the organization. Things worth reading: 26th November 2020. You then have to think about how you engineer the technology and how you build for modern systems that are scalable, elastic, and made for experimentation. And I would not necessarily focus on the pet projects. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. McKinsey Insights - Get our latest thinking on your iPhone, iPad, or Android device. So not so much an inward process, but how the customer would actually experience the app that we wanted to put out. It is a vital change in how banks and other financial institutions … Sengupta: Do you see any impact on the culture of the organization? tab. Once you're clear on that, the rest starts to become very easy. So it’s not just the outcome that is great, I actually think that the internal mechanism by which we drive the business, to actually think through because our metrics are very granular, that is the part that I think is beginning to actually contribute much more than external communication, but really driving our business as a technology business. So how do you attack a market of a billion people? Something went wrong. But how do you build a mobile-only bank in India and attract customers at scale? With that, you can really start to practice agile at scale. The main problem, paradoxically, is that legacy solutions still work. Previous McKinsey on digital transformation in banking (free research) Related Articles. That was missing a D, and we, as DBS, fortunately have a D. So, our mission became how to become the D in GANDALF. Making money out of a crisis. If you can crystallize that down to a message that everybody can grasp on a single page, then you have something very powerful that you can start to push on.When we looked at customer service, for example, we came up with RED: Respectful, Easy to deal with, Dependable. In a 2012 report (PDF opens), called “Digital transformation in 10 building blocks to boost customer experience and ROE”, the Efma (a financial industry organization promoting innovation in retail banking) and McKinsey indeed stated retail banking was lagging behind in digitalization/digitization. Obviously, we wouldn’t make any money and that wouldn’t be a good outcome. Third, you have to really think about organizational constructs: How does DevOps work? Sengupta: How convinced are you now of its robustness? Something went wrong. tab, Engineering, Construction & Building Materials, Travel, Logistics & Transport Infrastructure, McKinsey Institute for Black Economic Mobility. According to the Mckinsey survey, financial service executives across the world believe enhancing customer experience is the top priority for digital transformation projects, 76% of participants value investing in customers while 16% prioritizes productivity and operational cost reduction in digital transformation strategy. Strategic choices for banks in the digital age. He also plays a lead role in driving the bank’s innovation agenda, which encompasses design thinking, agile methodology, data analytics, fintech partnerships, and hackathons etc. Digital transformation should not only help them increase customer satisfaction and prepare for the new age of banking, but also to generate more profits. Unleash their potential. DBS Bank Chief Information Officer David Gledhill shares his insights on DBS’s digital transformation with McKinsey’s Vinayak HV, a partner in the Singapore office. The other thing that I think we are beginning to do very well is to understand which processes are truly digital. our use of cookies, and So, tell us a little bit about how it all started. That was hard for us to accept, actually. In their struggles to get digital transformation initiatives over the line, banks typically take one of two approaches. We obsess over those scorecards and critique each other’s scorecards. Of course, we don’t know. So it wasn't just sharing the latest business article. So we had to learn as we go, which means we had to iterate very fast. McKinsey on digital transformation in banking (free research) I only just stumbled across this 124 page report from McKinsey and, building on yesterday’s free research from Deloitte, this report is all about digital transformation and replacing core systems, my favourite subject. 10 hours ago. I just had a review meeting with one of the business units today and they were talking about the way they go about trying to accelerate digital adoption; so, for a traditional customer, how do you introduce incentives, products to attract them to buy a digital product? The first is to create a separate internal organisation with a remit to develop new digital products and services, unencumbered by the bank’s existing legacy processes and technology. Flip the odds. our use of cookies, and Across the world, customers are generally satisfied with their … Our mission is to help leaders in multiple sectors develop a deeper understanding of the global economy. How do you build business-ops teams, and how do they interact? Never miss an insight. Flip the odds. We were trying to figure out how to scale our presence in India, where we had very few branches. Now first of all, we had no clue how it was going to work. Build a Digital Driven Organization. It seems much of the Fintech action in recent years has been in retail banking and for the casual observer, the digital transformation of commercial and corporate banking still appears to be stuck in the analog world. I understand how to create a mortgage product and sell it, and I know how to build systems for it. These last two points were just as important as the first one. But for the analyst to translate that more concretely into a valuation model—because these are not technology analysts, these are banking analysts—the way that we have communicated is: how these operational metrics translate into a lower cost-to-income ratio. Dy. Levels of satisfaction are relative. Reinvent your business. Joydeep Sengupta: One of the things that people like most about DBS’s digital transformation journey has been the fact that it is able to communicate the value that you’ve captured through this process. McKinsey (2015) Digital Transformation for the Retail Banking Industry 5 Overall, digital technologies are becoming more mature and pervasive. The top part of the scorecard is all financial metrics, customer metrics, shareholder value-add, and revenue generation. So big transformations like automated lending into India or how to transform future-ready employees, go in that box. Practical resources to help leaders navigate to the next normal: guides, tools, checklists, interviews and more, Learn what it means for you, and meet the people who create it, Inspire, empower, and sustain action that leads to the economic development of Black communities across the globe. Sengupta: There are many banks who say they are all going through digital transformation. The digital transformation of any enterprise is a herculean task requiring a willingness to embrace cultural change, the ability to immerse the entire organization in the customer journey, and a total commitment to digitize to the core. Focus instead on what gets the business moving, what gets speed to market faster, what gets journey thinking embedded in the organization, those sorts of things. We learned you have to embed this thinking into the management fabric of the company. If you just say you want customer journeys, that's not going to drive results. . Most transformations fail. The digital transformation of any enterprise is a herculean task requiring a willingness to embrace cultural change, the ability to immerse the entire organization in the customer journey, and a total commitment to digitize to the core. They were hard to shift, and they went through this whole transformation agenda, and along the way, built a load of tools that we thought we could also use. One was to shift from individual projects that need approvals, subcommittees, and things like that, to giving the freedom to a group of people to operate like a platform. DBS Bank recognized that digital transformation doesn’t just mean building a new website or putting on “digital lipstick,” as their CIO said in an interview with McKinsey. It was really going into how these companies are engineered. We were able to show that digital customers had two times higher income per customer compared to a traditional customer. September 14, 2020. When it comes to digital transformation, he explains, we’re really discussing change management. Subscribed to {PRACTICE_NAME} email alerts. Global economy other thing we did in India elements as vitally important 500+ connections of satisfaction are.... For this site to function well you automate everything from testing through to...: do you automate everything from digital transformation banking mckinsey through deployment to increase cadence and set it free these are! To Create a mortgage product and sell it, we wouldn ’ t get very far of systems. 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