How Gupta turned DBS into the Bank of the Future
Euromoney: World's Best Bank 2019
Almost 10 years into his role as chief executive of Singapore-based DBS, Piyush Gupta has spent the last six of them on a mission to make an institution that looks more like a tech company than a bank. His message and methods are working, as digital disruption shreds costs and creates new revenue streams. Has DBS created the template for how successful banks will need to look in the future?
In 2013, DBS chief executive Piyush Gupta convened a senior staff meeting in Seoul, featuring the entire board and management committee.
The former Citi man was four years into his job by then, and had come to a realization: that gaining scale as the bank used to do, by acquisition, was no longer going to work in an environment where costs were climbing, new startups were unbundling banking, and technology platforms were becoming powerful global forces every bit as potent as the banks.
The starkest lesson was not Amazon or Google but closer to home.
“In 2013, it became clear that Alibaba and Ant Financial were going to be a game changer,” he says. “By then they were not only into payments, but getting into funding, lending, insurance; they were getting into every part of our business and doing it differently. They had no branches, no people. They were doing it all digitally.”
Gupta reached a conclusion: “We have to think about the future differently.”
He and the board came up with an agenda saying they would have to embrace digitalization, and do it properly, if they were to succeed.
“We had to start thinking like big tech. Our frame of reference had to be Amazon or Alibaba. We had to stop thinking about what other banks will do. We had to start thinking about what big tech would do.”
That meeting in Seoul started a journey that, six years later, has seen DBS named the world’s best bank by Euromoney.
There has always been something different when listening to Gupta, or anyone at DBS, talk about tech. Every bank talks about tech and digital disruption, but with DBS the most energetic person on the subject is the chief executive and the zest flows all the way down through the bank, through its visible front-end applications right into the invisible behind-the-scenes functions and processes.
As part of the pitching process for this award, Gupta sits down with Euromoney and runs through a vast multimedia deck he has personally compiled with the assistance of a talented, and one imagines somewhat overworked, young colleague.
He ploughs his way through it at a pace but in truth knows every number in it verbatim anyway. Get him on to this stuff and he hits 200 words a minute – take it from someone who has attempted to transcribe his interviews – and it is not always apparent quite when he pauses to breathe.
Some of it is gimmicky.
“We want to be the D in Gandalf,” he says: Google, Amazon, Netflix, DBS, Apple, LinkedIn, Facebook.
Insisting the bank is a “26,000-person startup” is pushing it. And Gupta is as quick with a visionary soundbite as anyone.
“We have shaped the future of banking,” he says. And: “Sheep can become wolves. Everybody can change and everybody needs to change.”
This last one came from a meeting with Peter Ma at Ping An, one of a handful of people in the industry Gupta sees as visionaries on a similar path (BBVA’s Carlos Torres Vila is another).
Ma told him that the old guys were like sheep and the new guys were like wolves, so Gupta said: “I’m going to make my sheep wolves. When 70-year-old people are using smartphones, the notion that you can’t change in work is inconceivable to me.”
But the message, evangelical and pulpit-pounding though it is, has been communicated through the bank more successfully than in any other big institution that Euromoney is aware of. We met more than 30 people at DBS in considering it for this award. Every single one spoke passionately about the transformative impact of tech, data and wilful disruption in their business.
It has also been a sufficiently convincing message to attract people from some of the biggest names in tech. There are dozens of examples, but three of the most prominent would be Charlie Cheng, former director of cloud infrastructure at Google, Srini Reddi from Yahoo and Trevor Cheung from Huawei.
Gupta is not just a figurehead on tech because he is so deeply immersed in the nuts and bolts of it. Where many banks boast about the increases in their data centres, Gupta says with pride, his have been reduced by 75%, a function of the bank’s pioneering use of cloud computing. At the end of 2018 over 80% of the bank’s open systems were cloud-ready, and that figure is already out of date.
“That degree of cloud enablement, few banks have,” he says. “It has a massive impact on our data centres. They are one fourth of the size but have 10 times the capacity.”
One particular data point he likes to cite is release cadence, which is the speed and frequency with which the bank puts new applications into the market. This has increased by eight and a half times, he says.
This, inevitably, means putting imperfect products out, but Gupta sees this as a tech company does: as beta testing in the market. You launch something, learn from it, refine it and put it back out there.
DBS uses something called chaos engineering, a process of experimenting on software in production to ensure it can withstand stresses. It was developed by Netflix when it migrated to the cloud in 2011.
Netflix devised a tool called Chaos Monkey to deliberately disable computers in the production network just to see what would happen. DBS uses the same system in all new product developments.
“Our release process today is very similar to any fintech,” says Gupta.
One could argue that this approach has been applied not only to apps and application interfaces (APIs) but the launch of entire businesses. When DBS set up digibank in India, it was, in some sense, an experiment, with lessons that were applied when it subsequently launched in Indonesia. The lessons from there will be applied again when it rolls out in Vietnam. Each successive venture will be profitable more quickly.
“In Indonesia, our strategy has been more successful,” Gupta says. “We learned from and modified our India strategy.”
For India, the bank spread the net too wide – indeed, Gupta calls it net-fishing, an approach that in two and a half years garnered 2.3 million customers, but not necessarily the right ones. Indonesia has picked up 400,000, “but the 400,000 in Indonesia are far better customers”.
Nevertheless, while those ventures will take time to be profitable, across the overall business digitalization is a key reason for the group’s record profits.
Last year, we named DBS the world’s best digital bank, principally because of a metric it devised to demonstrate the different return on equity one achieves with a digital customer than with a traditional one; many other banks are trying to build similar internal measurements. Doubtless, Gupta has been well backed in his digital adventures; the board essentially gave him free rein to burn S$200 million ($146 million).
“It’s the right thing to do: tech companies have shown it can be done,” he says. “You have to be able to put some money to work without a return on investment construct.”
And, in the end, he hasn’t burned it at all.
His only regret is speed: “I should have gone to data sooner than I did. I wasn’t smart enough to figure it out, how much change it needed, the hard yards.”
Asked where DBS is on a scale of one to 10 in terms of using data to its full potential, he says four. And his willingness to disrupt further appears undiminished, even though the bank is an acknowledged leader.
An example of this disruption came with the appointment of Neal Cross as chief innovation officer in 2014. Cross was performing a similar role at Mastercard when the bank approached him.
He recalls his interview with Gupta: “I said to him: ‘What’s your innovation strategy?’ He said: ‘It’s really good. I’m going to hire you and you’re going to work it out.’”
This willingness to cede some of the big-picture thinking to someone else, and to accept the disruptive opinions of an outsider, was important.
Cross – a maverick who can sometimes rub people up the wrong way but is nevertheless gifted at getting people to change the way they think – was given freedom to disrupt the bank on the broadest possible canvas, and never found himself held back by Gupta or any of the other senior managers he worked with.
Cross has since left to focus on his eco-resort ventures in Sumatra and Aceh, but he was never the only figure in the tech revolution. At least as important, though perhaps less visible for being less brazen and not turning up to meetings in cargo shorts as Cross did, were the people he reported to, such as chief data and transformation officer Paul Cobban and chief information officer David Gledhill.
Gledhill also illustrates another strong point about the bank: succession planning. At a senior level, DBS has extremely low turnover – Jeanette Wong, former head of institutional, is the only recent example, and she is retiring, not going to a competitor – but in March it was confirmed that Gledhill would be leaving the bank to return to the UK, retaining a consultancy role at DBS.
He will be succeeded by Jimmy Ng, deputy group head of technology and operations. Ng had been in that role for 14 months when the announcement was made; Gupta had put him there specifically because he knew Gledhill would want to go back to the UK at some point for family reasons.
One sees the same succession planning at work with Tan Su Shan, the smart, driven, previous head of the consumer and wealth businesses at DBS, which routinely logged growth of over 20% year on year.
Gupta moved her to head of institutional when Wong retired, and he did so because any future chief executive will be in a far stronger position if they have covered both the retail and the institutional side of the bank.
He used the reshuffle to position other candidates too: Shee Tse Koon, former head of strategy and planning, was made country head for Singapore, and his previous role was filled by the hiring of Han Kwee Juan, who was chief executive of Citibank Singapore.
All three are in the mix for when Gupta moves on.
“I’m trying to build a succession bench,” Gupta says. “I’ve got four or five candidates, all plus or minus 50 who, with the right grooming, have the potential to take my job some day.
“I’m a big believer in having generalists,” he says. “One of the reasons I’m a good banker is I know a little bit about everything: I’ve run mortgages, I’ve done cards, consumer and corporate banking, transaction banking. So, to me, getting someone [Tan] who runs consumer and wealth and have her run the corporate side of the business is helpful.”
He says he has no intention of going – “not soon” – though some who know him expect him to enter politics in India one day. This would be in keeping with his earliest ambitions in life. “I was planning to be a diplomat, join the foreign service,” he says. (Citi, at the time, was a pretty close equivalent.)
It seems to rankle a bit that the market still does not value DBS as a tech company. The bank trades at 1.2 times price to book.
“A lot of tech investors have not cottoned on to the fact that legacy companies can qualify as tech companies,” he says.
He spent about 18 months trying to sort this out himself, going to investors to tell the story in order to change the shareholder register. However he says he “got sporadic interest, but not in the right places”.
Still, he sees advantages that have come his way, most obviously Asia’s demographics and growth outlook, but also the bank’s own size. DBS had 22,000 staff when he started; it has 26,000 today.
“I’m in an unusual position where we have enough money to dip into to make investments to solve problems, but we’re small enough to be able to put our arms around it. I’m not sure if the programmes I have run would transfer that easily to a place with 100,000 people in 100 countries.”
He calls DBS “goldilocks size”.
So when Euromoney puts it to Gupta that being a chief executive is a high wire act, waiting for the inevitable day when you have to fall on your sword because of something someone else did without you knowing, he says: “I’ve never felt that way. What is true, and has been true in the last few years in particular, is that the room for making a mistake is small. Because of society and public opprobrium, nobody gives you a second chance.
“What’s also true is that no matter how hard you try, you will always find some bad apple you never know about. But I do think we have the opportunity to create a culture, to put in systems, to put in control processes, dashboards and dials so that you should know what’s going on – certainly in my size of bank. I have a high degree of confidence I know what’s going on in DBS. It’s rare that I’m surprised by something.
“But if [it] was 10 times [its] size could I do that? There’s no way.”
He is big on the idea of a bank culture: “The lesson I have learned at DBS is that culture beats strategy, every time. It eats strategy for breakfast.”
All of his digital vision doesn’t detract from the fact that DBS is still, in the end, a bank, doing well in all the areas it covers.
The treasury and trade solutions team, which a decade ago was known principally as a straightforward play on burgeoning regional trade finance and cash management needs, has become the most innovative in the business and made considerable ground. John Laurens, the ex-HSBC banker who runs the global transaction banking business, says cash management grew 55% last year.
The wealth management business, run alongside consumer for several years by Tan until she was moved to institutional and Sim Lim stepped into the role, has positioned itself well in something of a Credit Suisse style, targeting entrepreneurs who need integrated advice on not only their own money but their corporate, investment banking and governance needs.
The investment bank, though it clearly has a head start with any partly state-owned client in Singapore, is much more than some in-house arm of the state or the commoditized debt machine that competitors say it is.
Across M&A, debt capital markets and (to the extent that anything happens in equity capital markets in Singapore these days) ECM, it is involved in many market-leading transactions, particularly in the development of the Singapore dollar markets. Few people know more about regional debt markets than Clifford Lee, local M&A than Choe Tse Wei or ECM than Eng-Kwok Seat Moey.
Another important element of DBS is the sustainability issue. This seems to matter to Gupta as a point of personal justification.
“One thing my team and I kept questioning was, everybody has a noble purpose – Facebook, Google – but is banking a noble purpose?
“We spent some time and eventually concluded that it is. Greasing the wheels of the economy for the last 500 years: the bulk of humankind development has come from that.
“But for 25 years people lost sight of that. They became more about: ‘what’s in it for me’. In the last decade, people are back to: ‘we can do real things for real people’. There is a purpose to our industry.”
Whether or not that’s true, the DBS Foundation is doing impressive work. The corporate responsibility team talks of “marrying digital with sustainability”, a theory well illustrated by its work on developing a trading platform for natural rubber with Halcyon Agri that encourages sustainable processing and better outcomes for smallholders. It has also been a leader on sustainability-linked loans in the region.
There is a thorny question about how much support the bank can truly provide for LGBT employees in a country where homosexuality remains technically illegal on the Singapore statute books, even if the rules aren’t enforced.
But on gender, DBS is one of the few places banks one can go into a senior management meeting and realistically expect to find a woman. In addition to Wong and Tan, CFO Chng Sok Hui is a woman, as is HR head Lee Yan Hong, consumer and wealth deputy Pearlyn Phau and SME head Joyce Tee.
Group strategic market and communications head Karen Ngui serves on the group management committee, and Euleen Goh chairs the board risk management committee, as well as the board of the DBS Foundation.
Tan has personally backed women livelihood bonds with her own money to get them over the line. She wants there to be more of them.
“It shouldn’t be a hard sell,” she told Euromoney recently. “Now you have a wealth transfer to millennials, who want self-actualization, they want to leave an impact. As more money chases companies that do good, the multiples of those companies will expand.”
DBS is being recognized as one of them: it is an index constituent of the Dow Jones Sustainability Index for Asia Pacific, the FTSE4Good Global Index and the Bloomberg Gender Equality Index.
“I’m personally convinced,” says Gupta, “that the bank of the future will be defined by sustainable outcomes.”
This idea of social good is put to the test by a quirk of DBS. Through its ownership of POSB, the old postal savings bank of Singapore, it has a lot of clients who will never make any more money for the bank. Migrant workers, in particular, will never transact in a way that’s profitable for DBS. There are about 600,000 DBS customers in this category.
“If I cut them off, I could put my return on equity up by half a percent,” says Gupta. “But I’m convinced it would not be the right thing for DBS to do. We have a role to play, we are the people’s bank. Trust comes from the fact that we do leave some money on the table.”
This is an easier call to make because of technology. DBS used to lose a lot more money on these people four years ago than it does today, because so much of the workload of servicing them is handled electronically now.
“Digital banking changes the ability to be able to play a social role at an affordable cost,” says Gupta, who serves on the UNSG Digital Financing Task Force.
Though Gupta is a serious force of personality, part of his success at DBS has been a sense that he learns something from other people, even if it can be painful to do so.
Asked for key lessons he has been given from those he has worked with, he quickly lists three.
Early in his career, he volunteered for a project with large clearing volume. “Because I wanted to be a hero, I kept saying it’s all under control, and actually it wasn’t under control. Six months later, when it all surfaced that it had gone pear-shaped, [Gupta’s boss] told me: ‘Piyush, it’s OK to ask for help’. That’s stayed with me.”
Another key piece of advice came from Aditya Puri of HDFC Bank, where Gupta worked early in his career; he continues to speak extremely highly of the bank to this day.
There was a group HDFC would not bank, but everyone else was doing so, and Gupta asked why.
“He told me: ‘Never get into a lending relationship you can’t control’. That stayed with me. If somebody owes me $100, I can control it. If somebody owes me $1 billion, they control it.”
A third useful lesson came at Citi.
“If you go on a long-distance journey, you cannot always drive with a tight hand on the wheel. Only take charge of the wheel when you come to the roundabout, the speed bumps.”
Gupta will be 60 next year, and though his enthusiasm for change can seem exhausting to an outsider, he still enjoys the business.
“I’ve done 35 years and I’ve loved every day,” he says. “I’ve never had a single day when I’ve regretted being in the industry. I’ve just had a ball.”