16 July 2018
Digital customers offer better cost/income ratio than non-digital clients, says DBS. Photo: Bloomberg
Digital customers offer better cost/income ratio than non-digital clients, says DBS. Photo: Bloomberg

DBS lays out benefits of digital banking push

At an investor event in Singapore last Friday, DBS said digital customers were 42 percent more profitable for the banking group compared to the “traditional” clients.

Following the event, the Financial Times quoted two London-based investors as saying that DBS gave the most detailed breakout on digital profitability they had ever seen from a traditional bank.

Singapore’s biggest bank highlighted the sharply higher margins it earns through internet-based services.

According to the bank’s figures, it made a return on equity of 27 percent for its digital customers in Singapore and Hong Kong in the first half of 2017. The corresponding figure for non-digital clients was eight percentage points lower, at 19 percent. 

The profits do not include DBS’ most digitally-advanced business, Digibank, which has grown to more than one million customers since becoming India’s first online-only bank last year, according to the FT report.

The presentation Friday showed that digital customers at DBS – defined as those who use online services to buy products or upgrade, or who do more than 50 percent of their transactions online – generate twice as much income per customer as traditional ones.

The group announced that digital customers made up 39 percent of DBS’ retail and SME customers in Singapore and Hong Kong, and that they contributed 60 percent of the segment’s income and 68 percent of their profit before allowances, the Straits Times noted.

Also, digital customers’ revenues are growing faster.

The customers came with lower costs, with their cost/income ratio at 34 percent versus a figure of 55 percent in the case of traditional customers.

Major international banks have been pursuing digital strategies, aiming to drive customers away from high-cost branches and call centers, in favor of low-cost apps, chatbots and websites.

“Investors are interested to understand the impact of digital banking to the cost stack of banks,” Ronit Ghose, Citi’s global head of bank research, told the FT.

But the analyst said it was hard to prove causation between digital channels and the higher profitability and revenue growth.

“Early adopters may be richer clients and they may be more profitable due to their wealth and activity levels rather than digital channel usage,” Ghose was quoted as saying.

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