DBS Bank's AI Transformation

DBS's AI Transformation

• DBS Bank, headquartered in Singapore, aimed to become a technology-driven company fueled by Artificial Intelligence (AI) by April 2023.
• More than 10 years prior, DBS began a digital transformation to integrate technology, improve customer experience and foster a start-up culture.
• DBS decided to use AI and machine learning to address user issues.
• Embedding AI into all products and services was a continuous journey with evolving objectives.

Overcoming a "Damn Bloody Slow" Reputation

• Before the transformation, DBS was known as ‘Damn Bloody Slow’ and not customer-friendly.
• Piyush Gupta, upon becoming CEO in 2009, aimed to stay relevant by fostering a different way of thinking.
• Gupta initiated a company-wide effort for digital transformation and AI, securing board approval for a large transformation budget.
• DBS achieved a 9% compound annual growth rate (CAGR) in income and 13% CAGR in net profit in the initial years.
• This performance encouraged further investment in transformation and business diversification.

Progress by 2023

• The AI-led transformation had led to excellent customer service and innovative digital solutions by 2023.
• DBS reported a record net profit growth of 20%, reaching US$6.02 (S$8.19) billion in 2022.
• The company invested US$0.74 (S$1) billion in technology each year for four years, prioritizing data capabilities.
• AI initiatives generated an estimated US$110.25 (S$150) million in added revenue.
• US$18.38 (S$25) million came from loss prevention and productivity in 2022.
• Gupta anticipated the economic value from AI-fueled growth to surpass one billion in the next five years.

Heightened Competition in the Banking Industry

• Increased digitalization intensified competition, leading the Singapore government to allow fully online banks by 2022.
• Grab, a Southeast Asian ride-hailing company, obtained a full digital bank license and entered banking in 2022 with SingTel.
• Singapore had a high banking penetration rate of 98%, and most incumbents offered strong digital product suites.
• Analysts predicted more aggressive product pricing and innovative solutions from technology companies, increasing competition.
• Gupta expressed confidence in DBS's transformation, believing they were well-positioned to compete

Broad AI Implementation at DBS

• DBS adopted an “All in on AI” strategy to incorporate AI into every part of its operations
• The bank made major investments to facilitate AI solution development and implementation.
• DBS ventured into new sectors using AI, including a digital exchange and a global carbon exchange.
• Future growth was dependent on discovering and taking advantage of the right business opportunities.

Disruptions in Traditional Banking

• The shift towards becoming a tech-focused company was catalyzed by the change in traditional banking.
• The COVID-19 pandemic made this clear, as consumers adopted digital banking options.
• Between February and June 2020, mobile banking rose by 34%, while branch banking fell by 12% across 30 countries.
• Analysts forecasted traditional banking's decline, with most services becoming digital in five to seven years.

Banks Losing Market Share

• Digital disruption made banks susceptible to losing market share to tech companies in financial services.
• Tech companies entered financial services in the early 2000s, competing on cost and squeezing bank margins.
• By 2021, fintech firms like PayPal, Alibaba, and Klarna had higher market capitalizations than many multinational banks.
• PayPal's market cap reached US$267 billion in November 2021, almost double Goldman Sachs’ and greater than the value of most major global financial institutions.

Changing Consumer Behavior

• Consumers are comparing mortgage and interest rates online, opting for the best terms.
• Customers were increasingly seeking price transparency and product comparability.
• A 2021 study in Asia-Pacific found that 62% of consumers wanted to start new banking relationships online.
• Only 40% were willing to visit a physical branch.

Cost Efficiency of Digital Banks

• There were about 250 digital banks globally as of August 2021, with 20% in the APAC region.
• Digital banking was favored because physical branches are expensive.
• Traditional retail banks allocated 30% of total expenses to branch networks and 20% to IT for legacy systems.
• Disruptor banks with digital services had a cost-to-income ratio of 26%, while traditional banks had a ratio of 60%.

Incremental vs. Whole Organization Approach

• Traditional banks have implemented AI piecemeal, for example, chatbots and facial recognition for ATM usage.
• These standalone AI implementations had little to no core process impact.
• DBS chose an organization-wide strategy of incorporating digitalization and AI-based solutions.

Transformation from a Development Bank

• Originally, DBS was the Development Bank of Singapore, founded to take over industrial financing responsibilities.
• Established in Singapore in September 1968, it supported Singapore's industrialization and urban development.
• DBS expanded in Asia through acquisitions and organic growth, becoming Southeast Asia’s largest bank.
• However, customer service suffered amid this rapid growth.

Motivation for Transformation

• DBS aimed to improve its position, as it was ranked low in customer service among Singapore's major banks.
• Achieving growth via acquisitions and expansion in Asia faced constraints.
• DBS hoped to address declining revenues and stagnant growth through digital solutions.
• At the time, implementing organizational change was difficult given DBS had 22,000 employees across various markets.
• Procuring technology solutions from external parties also made changes to processes and products slow.

The “Every Unit Approach”

• DBS embarked on a transformation initiative in late 2009, targeting technology and culture.
• The transformation used a company-wide strategy centered on three pillars - being digital, customer-centric, and startup-minded.
• AI played a key role in achieving this transformation, enabling quick and effective scaling of solutions.
• DBS made sure existing businesses were not neglected during the transition.
• Digital transformation was expected across all units, including support functions like Audit and HR.
• The Audit department improved productivity through data analytics and machine learning for risk profiling and fraud analysis.
• HR improved employee satisfaction using data-driven machine learning to assess employee traits and predict attrition.

Overhauling of Technology

• DBS reorganized its business capabilities to integrate technology.
• The first six years focused on upgrading IT and operations to improve IT alignment.
• Technology and operations combined into a single entity to improve efficiency.
• Key processes were streamlined using lean principles.
• Core technology was upgraded, and an enterprise architecture was established to support a range of banking applications.
• A new core banking system was deployed across 12 markets within 28 months.
• Internet and mobile apps were launched to improve banking capabilities.
• Two councils were formed; a Customer Experience Council and Innovation Council.
• These councils aimed to promote a culture that was digitally focused.

Building an AI Advantage at DBS

• DBS's initial AI efforts included failures that provided valuable lessons.
• In 2013, DBS partnered with local research firm A*STAR to create an AI lab for three years.
• The team worked on a few projects, some successful and others not.
• Gupta considered these projects "signaling tools" for the organization.
• DBS ran a large-scale pilot project with IBM’s Watson for wealth management, but it was not successful.
• DBS realized agile methods and iterative solution refinement were necessary for effective project execution.

New Framework for AI

• After consolidating core technology in 2015, DBS analyzed emerging technologies.
• Personnel visited tech firms like Google and Amazon to understand industry practices.
• A rallying acronym, GANDALF, was introduced to inspire transformation which represents Google, Amazon, Netflix, Apple, LinkedIn, and Facebook.

Creating Initial Successes

• DBS pursued quick initial successes to foster organizational support for transformation.
• In 2014, the ATM team developed models for maintenance and cash replenishment.
• The effort reduced downtime by over 90%, decreased cash shortages, decreased reload trips by 10%, and increased returned leftover cash by 30%., increasing customer satisfaction.
• Digibank, started first in India in 2016 and was one of the first mobile-only banks with digital onboarding using Aadhaar.
• Digibank transformed retail banking call centers and customer service in India, Singapore, and other markets.
• The Customer Science team at Digibank India used AI tools to monitor customer journeys and intervene proactively.
• Digibank India was able to significantly improve productivity, customer base, and transactions while maintaining the same customer contact center headcount.

Hiring and Developing AI Talent

• DBS aimed to switch from 85% outsourcing to 85% insourcing to establish a 'tech DNA'.
• DBS began aggressively hiring in 2015, bringing previously outsourced roles in-house.
• The firm hired technologists from Google, Yahoo, and Huawei to establish solutions with APIs and cloud computing.
• The "building our timber" plan focused on building tech DNA, being an employer of choice, and upskilling employees.

Prioritizing Data and Cloud Adoption

• DBS recognized the importance of accessible data for AI and launched the Data First transformation in 2018.
• It had four pillars: analytics capability, culture and curriculum, data usage enablement, and tech platforms.
• Legacy banking apps were moved to modern platforms for consistent and reliable service.
• Data servers were virtualized, and an “everything goes cloud” policy was implemented.
• The policy was implemented to reduce reliance on data servers, expand computing power, and reduce footprint of data centers.

Encouraging AI Experimentation

• Experimentation was essential for AI adoption, with infrastructure and processes developed to improve solution scalability.
• A KPI was set to conduct one thousand experiments annually, many using AI.
• Managers were motivated to explore data use for AI solutions at events showcasing innovative projects.
• Gupta personally curated events to display interesting bank experiments using AI.

Empowering AI Experimentation

• Gupta encouraged AI experimentation by allowing units to hire their own data scientists to drive innovation.
• The HR division developed a Job Intelligence Maestro that aimed for the best hires.
• The division developed a personnel attrition model, using 147 data inputs.

Embedding AI in Customer Service

• Projects rapidly implemented aimed to digitize customer journeys.
• The focus was on digital acquisition instead of branch banking.
• Focus on paperless processes and instant transaction fulfillment and increased engagement.
• Customer behavior data was fused with system data to develop predictive models.
• For example, the customer center team reduced inbound calls by 14% via analysis of transaction data.
• Gupta said these methods enabled more meaningful customer interactions.

Automation Strategy Implementation

• An automation strategy with RPA supported AI adoption.
• DBS partnered with IBM in 2017 to create a Center of Excellence.
• The firm automated over 100 complicated processes using RPA by 2020.
• Other data-driven AI was targeted toward customer experiences.
• Implemented image recognition, sentiment analysis, and ATM cash predictions plus other AI for regulators..

Advancing Capabilities

• The new data platform, “Advancing DBS with AI," included capabilities for data ingestion, security, and AI model management.
• The goal was enabling internal employee self-service creating AI models.
• Migration of data analytics systems was into hybrid clouds to improve deployment, scaling and processing.
• A dedicated group developed a digital services platform for partnership collaborations to deliver digital solutions.
• The API platform had 150 APIs across 20 of the service categories during launch in 2017.
• There were 50 of the companies participating at launch: AIG, McDonald’s, and Foodpanda.

New Business Paths

• DBS leveraged its AI focus to expand into new commercial sectors.
• Dedicated teams innovated to discover new business options: DBS Car Marketplace, DBS Marketplace, etc.
• Automation of the DevOps pipeline improved the release rate.
• DBS entered agreements with regional lending platforms such as Funding Societies and Moolah Sense .
• One notable project in 2017 was POSB Smart Buddy which was the first in-school wearable payment system.
• Parents can remotely view their child’s allowance using smart phone apps.

Upskilling Employees

• DBS used training programs, workshops, and mentorships to teach employees.
• Call center operators took on job tasks such as the customer experience.
• Creating continuous training environments to improve the customer journey.
• Training curriculum called DigiFY.
• The curriculum taught digital business, tech, communication, and risk in controls.
• The DigiFY curriculum was launched through a formal university.
• More than 80% of employees were able to go through the training from the curriculum back in 2020.
• Data analytics and heroes programs have been set up.
• In general these programs leverage cloud based tech and were in the thousands back in mid 2020.

Implementation of AI Systems

• DBS used five approaches to increase adoption in AI.
• More than 200 data test cases were spotted across the company: more than 150 that use AI.
• Reinforced the efforts: more than 700 analysis are engage in these initiatives.
• Developed a culture of data: the online learnings promote the data-driven mindset.
• Used ADA and generated tech: created customer experience, governance etc..
• Data was being continually improved to capitalise on all sectors..
• To maximize all AI use cases and individual operations .
• Having AI capabilities similar to digital, DBS can effectively compete .
• By 2020: organisation was working through ADA, existing apps moved out of the new sector.
• Banking’s data migrated from traditional sources into data lakes.
• Banks created metadata , cleaned up information data and improved the trend visibility.
• Banks use customer data in select scenarios.

AI Enablement at DBS

• AI was empowering employees and improve customer experience by 2021.
• Knowledge Repository for all AI.
• Easy to access assets were being developed.

Rewards

• DBS saw revenue rise from early phases
• Growth from $6 billion to $2.24 billion in 2022.
• Banks invested in regional funding and payment e-marketplaces.
• These partnerships tripled revenue as well $1 billion in loans was earned.
• Partnerships were lower than expatations due to COVID restrictions.
• New tech enable the firm to look into other approaches by climate carbon tax.
• Revenue increase during financial crisis.

The Future of DBS with AI

• Other companies have begun to emulate and have similar AI transformation.
• Directors feel the virus elevated initiatives
• For example there may be more reports by mobile bank vs branch locations.
• The current wave of AI, provides AI with assistance, improve customer solutions, and automate workflow.
• AI helps to be aware and provide support and prevent customer issue.
• Risk continue to evolve technology 5G and other AI that are transformative.