The Raffles Conversation: Putting the customer first

Taking a sleepy bank into a digital future, DBS CEO Piyush Gupta pushes fear and hope in equal doses to nudge staff to think big. BY JAMIE LEE

Singapore, 09 Nov 2019 - There is a story that DBS chief Piyush Gupta likes to tell, and it goes like this: in 2012, DBS ATMs in the Bugis area were hit by a card skimming fraud that resulted in about a million bucks in unauthorised withdrawals.

The regulators bayed for blood. As it turned out, a staff at the bank's operations team had turned off a security feature known as a jitter, which slows down the card from being spat out from the machine. It does this to distort the information copied from the magnetic strip of cards. (Fraudsters install a device to copy the card information found on the ATMs, and make purchases or make withdrawals off those stolen card numbers.)

"When we got skimmed, the regulator came to us and said, 'hey who turned the jitter off, and you should hold the person accountable and punish him'," says Mr Gupta.

But the decision to remove the jitter was a judgement call by one staff who wanted to solve the bigger problem of snaking queues at the ATMs. There's also this tiny detail: most people seem to pull the cards out in haste, perhaps half impatient already at having had to stand in line to get cash. Or they're just in a hurry. In any case, yanking the card out simply renders the jitter quite useless.

"In our case, our queues were so long. This guy took the view that by keeping the jitter on, we were adding another 8 to 10 people to every queue," Mr Gupta recalls.

"We took the view that whoever put the jitter off actually applied his mind to it. It wasn't a stupid decision. So we told the regulator we're not going to punish the person. In fact, we gave the person an award for applying judgement, and doing stuff which we thought made sense for the customer."

What moves an organisation once wrapped in tight bureaucracy to dance to an up-tempo beat? A decade in, Mr Gupta has breathed new life into DBS. His unflinching bet on exploiting technology is by now well known to most. To him, it was the only way that Singapore's largest bank - or any bank - would be able to withstand the Big Tech wave that has washed out the advantages that banks once easily flaunted.

But the tech talk is a part of a bigger strategy. For DBS, the top performer among Temasek-linked companies over the last few years, the laser-focus was on the customer. The rubric for staff was this: if it makes sense for the customer, it's okay to do it.

"That was a really liberating thought for people," says the veteran banker.

Customer experience is not a feel-good marketing tag these days. Big Tech has figured out how to make each customer count, and milk you for your last shopping dollar. Amazon aggregates the customer's buying preferences, and makes recommendations. Alibaba does the same. Google knows where you live, what advertising entices you most, and what you're curious about.

Taken all together, today's data flood - all of 1,200 petabytes stored by just Google, Amazon, Microsoft and Facebook alone - has dramatically changed the competitive landscape for banks. Big Tech could eat their lunch.

And they already have. As a simple example, Mr Gupta points out that in just 18 months, Google Pay has captured more than half of the domestic payments in India, a market with 1.34 billion people.

"If you look at the nature of our industry and you play logic, it's a bits and bytes industry. We don't make anything. It's about information, it's about data, and it's about accounting," says Mr Gupta.

"Our biggest negative vulnerability right now is the fact that many of the Big Techs have a source of capital which is much cheaper, and a lot more patient than our source of capital. So they can continue burning money for long periods of time, and most public companies can't do that."

To be clear, some backlash about tech companies has come to the surface. Over in China, there is greater regulatory scrutiny on how large tech companies are hollowing out the industry, and posing new forms of threats on financial stability.

Chinese tech giants have also done less damage in DBS's core markets than Mr Gupta anticipated, because their joint ventures with partners here haven't taken off.

That being said, while the Chinese have been somewhat slower, other players such as Google and Facebook, are perking up. And if that uncertainty wasn't enough, Mr Gupta also downplays the cherished trust factor for banks.

"We're regulated, we have deposit insurance, and therefore people say it's safe to leave money with us. But today, a lot more private sector corporations have ratings as good as, or better than, the banks. So tomorrow you go and ask people, 'are you willing to trust Amazon, Google, Apple'? There are lots of people willing to buy the equity, who will also be willing to trust them with money. So the trust element is replicable at scale by Big Tech," he says.

"Then the second big thing that banks do is, we understand credit better and we can allocate this capital better. The reality is that our skillset of qualitative risk assessment is rapidly being, if not supplanted, then supplemented, with a skillset of data business assessment. And the minute you say that data counts, then you start figuring out that other people can do this too."

In the face of looming threats, there is fight or flight. For Mr Gupta, the foggy landscape has meant taking along 26,000 people on a do-or-die mission in battling the bigger giants of today. That meant balancing that sense of urgency - mixed with the paranoia about the unknown - with what he calls "a sense of the possible".

"In our case, the fact that we saw the Chinese tech giants being so aggressive was a big catalyst. It really drove us to thinking very hard about what could happen as these guys expanded the business, changed the model. They could destroy us," says Mr Gupta.

"But the sense of the possible and optimism is equally important, because it's very easy, once you're fearful, to get paralysed; then you can become a deer in the headlights and so now we're dead, can't do anything. You've got to be able to create that (optimism) and that comes from, in my experience, low-hanging fruit. And once people start seeing the results of small things, they get more and more motivated and energised to keep addressing the big things."

That means backing the staff who chose to turn off the ATMs' jitter to do right by the customers. (And then DBS dramatically changed the ATM monitoring system so their notorious queues are now a distant memory.)

That means forcing staff to work on six-month projects that were driven by the digital agenda, with Mr Gupta personally looking at these ideas, "to kick the tyres", as he put it. Some say the CEO has sat in meetings to deliberately play devil's advocate to keep staff on their toes.

To drive his bench strength, it is said he also gets his senior leaders into intimate sharing sessions, where they would confront their own strengths and weaknesses, a tack similar to that taken by Microsoft CEO Satya Nadella with his lieutenants. A bit like group therapy, quips a senior DBS staffer.

"Banking is a business of execution. Strategies are a dime a dozen, how do you actually transform the strategy, to get people to do. And that comes from laying a roadmap, being able to put the resources behind it, and then actually monitoring and getting hands on," says Mr Gupta.

"I'm quite strategic, but I do detailed reviews on the things which I think are important. I go two levels down, I ask the tough questions, and push and prod, to make sure we get to the right place," adds the CEO who monitored the queues himself at ATMs in his early days to assess the underperforming retail unit then.

That also means raising the bank's technology spending, as DBS began to embrace the use of open-source code, cloud computing, and application programming interfaces (APIs), to ramp up its service performance. In 2014, Mr Gupta announced winning the board's blessing for S$200 million to invest in technology, without the pressure of a swift return on investment.

Few would be convinced there was no pressure to deliver down the line. The thing is, though, technology eventually starts paying for itself, says Mr Gupta. The bank's data centres boast a high server compression ratio, which means less spending on storage, and higher processing speed as data can be more efficiently compressed, and that should spell savings over time.

And there are clear digital dividends today. DBS has captured Top-Three market share across key market segments in retail, including in mortgages, bancassurance, and cards. Over in the small-and-medium enterprise space, DBS used to be Number Three among the banks. Today, depending on the segmentation, it's no longer the last of the Singapore trio, he says.

"If you look at our history, from 2009 to 2014, we stemmed our decline. Our market shares were eroding two percentage points a year. With phase two of the digital transformation, we've seen market share lift," says Mr Gupta, referring to the last five years.

"Singapore is a mature market, so it doesn't grow exponentially. Yet our market shares are up, materially and meaningfully. I can only assume that it's not that the customers suddenly started spending twice as much on banking, but that they are spending twice as much with me. It's more likely that we got the business from some other bank."

DBS has also found traction among multinational corporations that offer the Asia-based bank "large-ticket" mandates for supply chain management and cash management for the Asian part of their global business. Today, roughly a quarter of the bank's APIs are developed for corporate banking. And its cash management business has cracked its 2020 target a year ahead of schedule.

It may be why the bank - which holds the lion's share of local consumers' savings today - seems less worried about financial liberalisation on the retail front in Singapore. On the cards is a platform offering consumers a consolidated view of their financial assets and liabilities across different banks, making it easy to switch into more compelling products.

"Banks that are not prepared will lose. If I can offer the same service as any other third-party, why will somebody move," Mr Gupta says, pointing to DBS's recent rollout of low-fee exchange-traded funds as an example.

To keep up with all that competition, however, DBS must invest, he acknowledges, and he reckons the early "downpayment" on technology gives the bank room to divert spending to fend against the competition, and bulk up further.

Why we exist

Ask him what defines a leader today, and Mr Gupta turns slightly philosophical, and sees two profound challenges. One is having society question more intensely the role of companies.

"The reality is that we are going to come on to increasing scrutiny from the man on the street, given income inequality, to justify why we exist. And I think leaders are going to have to be really conscious of that."

The other issue is the ability to confront and construct new rules for morality, ranging from data privacy to the role of robotics in the workplace. "People underestimate the importance of philosophy, psychology, social sciences, and anthropology, in the jobs of the future. I think the big questions we will face are questions on morals."

He wonders out loud if he made the right call when asked about the bank's decision to end the financing of coal-power plants, once it closes off its previously committed projects through to 2021.

Mr Gupta is troubled by statistics showing that renewable energy contributes to just about a quarter of global electricity produced. Stripping out hydropower, that leaves wind and solar contributing less than 10 per cent to global electricity generation. "One of the hardest decisions was the coal decision," he says. "For the next 50 years, renewable energy won't get to 50 per cent of global energy. So it's just reality that if you want to give electricity to people in Vietnam, Myanmar and Indonesia, you have to use fossil fuel and you have to use them, because otherwise for the next 20 years, people won't have electricity in their homes."

The International Energy Association report says Southeast Asia's overall energy demand is set to grow by 60 per cent between now and 2040. Coal demand will rise in tandem; renewable sources of power generation would account for only around one-third of the increase in the region's electricity demand from now to 2040. Germany will cut its reliance on coal, but only by 2038, Mr Gupta notes.

"On the other figure that if we don't start doing something, I mean the planet is just doomed. So we will see whether we can make a difference, but it's not a straightforward choice."

These leadership questions weigh on his mind, alongside the estimated 150 emails he gets from employees every quarter on internal issues, including policies that they think are wrong. He spends three months replying to them all. He has also replied directly to customers' complaints.

"We genuinely learn things which I would never have known about, and the issues which we need to resolve and fix. So if I don't address them and reply to them myself, people will stop writing."

Mr Gupta dismisses the notion that he would leave behind big shoes to fill. His A-team now includes head of institutional banking group Tan Su Shan, Singapore country head Shee Tse Koon, and group head of strategy and planning, Han Kwee Juan. Asked if having these individuals earmarked so openly as potential CEOs would create rivalry, he insists otherwise. "You should go ask them," he quips.

As it turns out, Ms Tan meets with BT for an unrelated interview a few days after. And when asked, she is unequivocal: "I will set the record straight. Piyush is not going anywhere."

Talk of retirement and potential successors? Throughout the interview hour, Mr Gupta - who will turn 60 next year - barely sinks into the armchair. He seems comfortable pivoting at the literal edge of his seat, even as the sun calls it a day. "I'm waiting for them to change the retirement age to 70."

Chief Executive Officer DBS Group

Born in 1960

BA (Honours) in Economics, St Stephen's College, Delhi University, India
Postgraduate Diploma in Management, IIM, Ahmedabad

1982 to 2009:
Citigroup (where his last position was Chief Executive Officer for South East Asia, Australia and New Zealand)
Since 2009: Chief Executive Officer and Director of DBS Group
2013: Accorded the CEO Leadership Achievement Award for Singapore and Asia Pacific by The Asian Banker
2014: Named Singapore Business Leader of the Year by CNBC
2016: Won Singapore Business Awards' Outstanding Chief Executive of the Year
2019: Recognised as one of the world's top chief executives in Harvard Business Review's 2019 edition of "The CEO 100"

Source: The Business Times © Singapore Press Holdings Limited. Permission required for reproduction.