First came mobile wallet companies, then came the mobile payment systems of traditional banks. Now, the already crowded Indian mobile banking space has a new entrant: Singapore-based DBS Bank’s Digibank, a mobile-only bank.
After having a not-so-impressive performance in the country so far, DBS is making its strongest bid to expand its retail presence in India, which, along with China and Indonesia, is now part of the trinity of strategic markets for growth identified by the DBS board. India is the only country in which Digibank has been introduced (in April), with plans to roll it out in Indonesia and China over the next 12 to 18 months.
Taking advantage of the existing infrastructure—mobile phone and internet penetration, Aadhaar card-related and PAN card-related information (gathered and verified by the government)—DBS’s Digibank is completely branchless and paperless. Becoming a customer would require a one-time biometric authentication process at any of the 500 Café Coffee Day outlets in eight cities.
“The future of banking is going to be substantially different from what we have seen. It is on the cusp of a major revolution. If you think of the last five years and see the changes in retail, taxis, travel and music, it is happening industry by industry,” says Piyush Gupta (56), the chief executive officer and director of the Singapore-headquartered financial services major DBS Group. Banking had been different from other sectors, he adds, because it was regulated and the psychology around money has been different. “Banks themselves have been distracted by issues like Basel norms, capital adequacy and liquidity concerns [post the 2008 global slowdown]. But, in the next five years, we will see a tremendous transformation in the way banking is done.”
India before China
DBS had started on its digitisation curve around 2012-13 by investing in technology infrastructure. However, after its bid to acquire Indonesia’s Bank Danamon fell through in 2013, the group changed its strategy from growth by acquisition to growth by digitisation. “Expansion would [now] need to be through digitisation. We had spent a lot of time re-architecting our backend technology. At our strategy meeting in Seoul in 2013, the board concluded that the time was right to completely rethink, step up and revolutionise the way we banked,” Gupta says.
In the last few years, DBS has spent more than SGD 2 billion (US $1.45 billion) to strengthen infrastructure, and improve the resilience of its networks and hardware. Unlike other Western global banks, it was not limited in terms of capital or liquidity: The Asia-focussed bank has total assets of SGD 458 billion (US $332.4 billion) and reported a record net profit of SGD 4.45 billion (US $3.22 billion) for the year ended December 2015. Compare this with Bank of America, which had total assets of $2.1 trillion and a net profit of $15.9 billion for the same period.
DBS’s digital strategy was also spurred by Gupta’s concern for the way in which Alibaba, China’s ecommerce behemoth, entered several aspects of businesses that were traditionally carried out by banks, like payments and credit ratings. “Alibaba’s finance affiliate company [Ant Financial] has created its own credit bureau Sesame. They have the fastest growing loan book. They are one of the biggest payment companies, with zero branches,” says Gupta. “If consumers are willing to accept it from an Alibaba or a Wechat, then why not from an integrated banking provider? That is our basic premise.”
In recent years, DBS has developed several digital products, including mobile wallet DBS PayLah!, international money transfer system DBS Remit, mobile banking through DBS Ideal, and a virtual account opening system for SME customers.
But instead of launching in China—a significant market for DBS—Digibank was started in India. Gupta says that even though the country is three years behind China in terms of smartphone penetration and usage, it offers a unique stack in the form of an architectural framework that is still being created. This includes an existing eKYC (know your client) system and the Aadhaar authentication framework, electronic signatures and digital lockers, the recently launched Unified Payments Interface (UPI)—which allows for swift payments across banks—and finally, a consent system where customer information is made available to anyone else for use. “This type of architecture is not available in the US or in China. India is one of the few countries that have put together a public architecture to enable this tele-services system,” he says.
This also means that DBS’s Digibank will be competing with mobile payment systems such as HDFC Bank’s PayZapp, ICICI Bank’s Pockets, Axis Bank’s Lime, and State Bank of India’s SBI Buddy, along with mobile wallet companies like Paytm and MobiKwik.
However, DBS did not want to limit itself to being a payment solutions provider. “A payment capability is hard to be profitable. Payments are a reasonable part of the financial banking wallet but not a large part. It is very important if it is the marginal product; that is, if you have the capability of being a complete bank, [and] then if you create a payment revenue stream on top of that, to create customer stickiness,” Gupta says.