Are Major Banks in Singapore Realising Their Digital Transformation Agendas?

Are Major Banks in Singapore Realising Their Digital Transformation Agendas?

by May 17, 2023

Singapore, renowned as a financial hub and the prominent digital economy in Southeast Asia, is spearheading digital transformation in financial services, including its incumbent banks.

While traditional banks have been sluggish to modernise in the past, this recent digital transformation push has been further exarcebated by the Monetary Authority of Singapore (MAS)’s endorsement of fintech startups and digital-only banks.

The award of digital full bank licenses in December 2020 to GXS Bank, Sea Limited’s Mari Bank, and Trust Bank has sparked a digital revolution among Singapore’s three major banks: the Development Bank of Singapore (DBS), Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank (UOB).

The digital transformation strategies of banks in Singapore, aimed at competing with emerging fintechs in the aftermath of surging digital adoption by consumers and businesses post-pandemic, are poised to serve as a blueprint for other traditional banks in Southeast Asia.

In the long run, these digital transformation strategies could better equip incumbent banks outside of Singapore to address key issues plaguing their countries such as large unbanked populations, unmet customer needs, technology modernisation, and talent gaps in the digital sector.

So how is the ‘Big 3’ of Singapore banks each tackling their digital transformation agendas?

DBS: Embracing tech company thinking

DBS Bank

Unlike most major banks, including those in the US and continental Europe, DBS has made significant strides to establish itself as a tech-minded company for years.

As part of its digital transformation journey which kicked off in 2014, DBS has made sizeable investments to overhaul its technology stack, making it cloud-native. Today, a remarkable 99% of its applications are either cloud-native or cloud-enabled, showcasing the bank’s commitment to cutting-edge technology.

In a strategic move in 2018, DBS established the Platform Operating Model. This innovative model brings together personnel from across regions and roles to collaborate on 33 platforms — facilitating the sharing of data, resources, and reusable assets across the bank.

This collaborative model has proven particularly fruitful in the Consumer Banking Group, where, in that same year, teams constructed an artificial intelligence (AI)-powered engine to offer customers self-service digital options.

A key aspect of this award-winning digitalisation process has been the collaboration with Amazon Web Services to train over 3,000 DBS employees in digital tools, AI, and machine learning.

DBS has developed 85% of its technology in-house during its cloud-based tech infrastructure transition, harnessing data for personalised intelligence and analytics to better comprehend customers’ needs.

The bank has adopted a startup mindset, embracing a hybrid multi-cloud infrastructure to reduce costs and focus on customer-centric processes. As a significant step in its digital journey, DBS launched the DBS Digital Exchange during Singapore’s post-COVID-19 economic transition, enabling self-directed trading of various digital assets, including security tokens and cryptocurrencies, via its digibank app.

Meanwhile, the collaboration with JP Morgan to co-create Partior, a blockchain-based cross-border clearing and settlement provider, signifies the future of digital payments.

DBS’ Risk Platform is another testament to the bank’s digital prowess. It features digitalised and simplified end-to-end credit processing, tapping the power of on-demand, cloud-based design, analytics, and machine learning. The platform represents the bank’s focused efforts to integrate advanced technology into its core operations.

Over the years the bank has set up or participated in a varied assortment of forward-thinking digital initiatives, that has seen it be repeatedly hailed as among the best retail banks globally.

However, DBS has also encountered technical issues during its digitalisation journey, with online banking and payment services disruptions occurring at least three times in the span of 18 months, prompting MAS to mandate an additional S$1.6 billion of regulatory capital to ensure sufficient liquidity.

With regulators looking to crack down on unscheduled service interruptions of critical IT infrastructure at Singapore banks, MAS and consumers both decried the “unacceptable” disruptions, drawing questions on DBS’ digital transformation roadmap.

The recent interruptions are reportedly the first since November 2021, when DBS experienced 39 hours of disruption — the bank’s worst outage in a decade. CEO Piyush Gupta issued an apology following the latest incidents, and an investigation by the Special Board Committee with an independent external expert is underway to review DBS’ technology resiliency.

UOB: Harnessing emerging tech and talent

UOB

UOB has invested heavily in big data, artificial intelligence, cloud, and robotic process automation to digitally transform its operations. A significant portion of its annual ICT spending, estimated at US$475 million for 2021, is dedicated to software, ICT services, and hardware acquisitions.

UOB has incorporated a variety of emerging technologies to boost its operational and service capabilities. An enterprise-wide big data platform helps UOB gather critical data insights to inform business improvements through AI, machine learning, and analytics.

UOB’s technology-based initiatives have been numerous and varied, including the launch of the AI-powered digital financial management tool Mighty Insights in 2019. This tool integrates with the UOB TMRW (formerly UOB Mighty) app, offering customers an easy way to manage their finances.

UOB was in fact the first bank in Singapore to launch an AI-driven service on its mobile banking app UOB TMRW, providing personalised insights that assist customers with their financial planning.

Moreover, UOB has developed an AI-driven chatbot, complete with live chat and in-app voice call functions, to enhance customer experience digitally. This solution is a mainstay feature for UOB’s digital bank, TMRW, in Indonesia and Thailand.

Blockchain technology is progressively being embraced across UOB, including its use in the Know Your Customer (KYC) compliance process as part of TMRW’s customer onboarding journey. The innovative technology has been instrumental in enhancing efficiency and speed, while simultaneously assuring security and transparency.

The established bank states that it is continuously seeking individuals with proficiency in areas such as application programming interface (API) development and cloud computing. Technologists joining the team will have the opportunity to play a crucial role in designing and developing solutions that will fuel business expansion in the region.

But UOB’s suite of mobile and internet banking services are not without their fair share of complications. Platforms including UOB TMRW/Mighty, UOB Personal Internet Banking, and B2B digital banking service UOB Infinity have all drawn flak for service interruptions and system delays.

In June 2019, UOB apologised for widespread disruptions to its “ATMs, card payments, internet banking and [then-]UOB Mighty services” and promised to resolve issues quickly. Yet the following month, both its virtual and mobile banking services experienced brief delays again, possibly highlighting the shortcomings of interdependent digital infrastructure.

The revamped UOB TMRW was still experiencing errors such as the app crashing repeatedly, as late as mid-2022.

OCBC: Leaning on open source agility for growth

ocbc

As Singapore’s population becomes increasingly reliant on mobile banking apps for various transactions, banks must ensure that their apps are secure, user-friendly, and functionally diverse. OCBC has embraced open source technology in its digital transformation journey, providing the bank with the agility and scalability required to modernise its technology architecture.

This approach differs somewhat from DBS’s strategy, leveraging open source tech as a resilience measure against dependency on proprietary technology. OCBC believes this will accelerate its innovation edge and power its data-driven solutions.

OCBC is updating its IT infrastructure on two fronts. The first focuses on core channels such as internet banking, mobile banking, and contact centre apps. The second centres on the Enterprise Data Science Platform (EDSP), which will enhance its AI deployment.

OCBC is adopting a hybrid cloud model to reduce dependency on any single provider, while maintaining auto-scaling capabilities to support platform needs. As it migrates its core apps and services to the cloud, the bank is starting with customer-facing applications, digital channels (internet or mobile), and contact centre applications. Subsequently, it plans to tackle core banking functions like payment and loan applications.

OCBC’s EDSP, leveraging Red Hat’s OpenShift platform, is helping streamline the bank’s internal data science processes and facilitating the development of smarter business apps. The EDSP is driving growth in areas of credit analytics, customer chatbot optimisation, and anti-money laundering (AML).

The shift towards a microservices-based ecosystem is making the rollout of new products faster and more cost-effective, replacing the traditionally cost-prohibitive, monolithic legacy banking infrastructure.

Like many countries, Singapore experienced an upsurge in cyber phishing scams in the wake of COVID-19, leading to the banking sector as a whole ramping up measures to raise awareness and prevent cyberthreats. Among those impacted was OCBC Bank, which confirmed that some of its customers had fallen victim by providing their online banking login credentials to phishing websites masquerading as official OCBC platforms in fraudulent SMS texts.

To address this, the bank introduced an instant ‘kill switch’ feature to give its clients more autonomy in the event of a suspected scam, enabling potential victims to immediately freeze all associated current and savings accounts including joint accounts, debit and credit cards, ATM access, digital banking, as well as OCBC Pay Anyone app access.

In addition, OCBC made goodwill payouts to some of its affected customers, promised investigations and wider industry oversight to tighten anti-fraud detection and prevention measures. To that end, OCBC plans to launch a new AML application that uses AI running on OpenShift.

Focusing on enhancing customer and employee experiences, the bank is further leveraging its digital capabilities, along with emerging technologies like Web3, in its ongoing journey of AI deployment.

As these traditional banks undergo digital transformation, they must ensure the robustness of their digital frameworks to maintain business recovery and continuity capacity. It is essential for regulatory authorities like MAS to not only drive digital transformation, but also monitor and supervise banks’ digital processes and transformation models closely.