A three step model for building ecosystems: lessons from the world’s best bank, DBS
In today’s hyperconnected world organizations cannot work in isolation and need to strive to continuously enhance their customer’s experience by building platform partnerships with other organizations. The leaders at Singapore-based DBS Bank came to this realization in 2017, three years into their digital transformation.
In 2014 DBS set the audacious goal of being recognized as the best bank in the world by 2020. The organization’s leaders recognized that its slogan ‘money lubricates life’ is a powerful statement, but one which could quickly become prosaic—too ordinary. People tend to take banking for granted or even see it as a negative in their lives. So, DBS’s leaders strived to identify what ‘banking with a sense of purpose would be like. The question they addressed was not ‘what did the bank want to do?’ but ‘how do we make dealing with DBS easy, fun, convenient, and meaningful?’ Then people would be able to see the kind of good the bank did for businesses and individuals as well as the value it added to society.
The team migrated toward making banking the opposite of painful—that was, to Making Banking Joyful. Due to the emergence of numerous technologies, the means for Making Banking Joyful was rapidly evolving. DBS leaders recognized that, by leveraging new technologies, they could make banking ‘invisible’ to their customers. That would, in turn, create opportunities for customers to have enjoyable interactions when dealing with the bank and, ultimately, to experience a sense of happiness and peace of mind throughout their banking journey.
A key component of the ‘Making Banking Joyful’ strategy was starting to build ecosystems with partners. Before DBS’s digital transformation, their business model was based on a network of branches, data centers, and customer reach through multiple products and services. But it had become increasingly important in this hypercompetitive world for organizations to scale up by leveraging the capabilities of partners. DBS now focuses its business model on building ecosystems because banking can no longer stand alone in a connected world. Today’s technology advancements allow gathering and analyzing detailed customer data while providing new kinds of connectivity to enhance its customers’ journeys.
In DBS’s research paper ‘Pivot or Perish: Ecosystem, the emerging business model’ an ecosystem is defined as: ‘Bringing together entities in disparate industries to create new offerings or capture value that individual organizations or sectors may not be capable of creating on their own. Through ecosystems, marketers gain the ability to cater to customer needs, without prompting the customer to look further than the company for a product.’
The birth of ecosystems at DBS
In 2012, bank leaders were already questioning how to connect different systems to improve customers’ experience. Outside the bank, people were talking about APIs (Application Programming Interfaces), but many bankers did not know what they were or could not see their potential. As DBS moved first to microservices and then to ecosystems, APIs grew rapidly in importance.
APIs that enable building ecosystems externally are about connectivity; internally they are about both control and connectivity. A team needs to have control of ‘who can do what internally’ because the person given the responsibility for operating the API and scaling up the business must be held accountable. Internally, an extra layer of control is required. At DBS, employees aren’t allowed to make changes on their own. (This differs from the norm in DevOps, in which one person does have control.)
APIs have become a significant driver of business growth, creating new value for businesses chiefly for two reasons: they offer customers a more embedded experience and reveal more data for analysis.
By 2017, DBS’s leadership team had reached two conclusions. First, it recognized the need to shift its thinking. That meant to be a digital player, leadership had to be open to partnering with other organizations and could not play by itself. Second, it deeply appreciated how customers didn’t start their journey from the bank. This awareness aligned with its work focused on a customer’s ‘job to be done’.
These two conclusions also recognized that millions of impressions, clicks, and engagements were being made outside the bank. If the bank couldn’t connect to these potential partners, then it was missing massive amounts of data and customer knowledge as well as future opportunities. In response, in 2017 the bank launched the world’s largest banking API platform, going live with more than 150 APIs. Today, it has more than 1,000 APIs and over 400 partners.
To guide the development of ecosystems with partners and understand the new approach, DBS adopted a three-stage framework called POC:
- P means Participate with other platforms where DBS comes through as a participant on an external party’s platform or For example, the bank strategically invested in Carousel (a site for buying and selling goods) as part of its DBS PayLah! platform.
- O means Orchestrate where the bank is the platform and brings on board partners and multiple For example, a customer can now buy or sell a car on the bank’s website, work out a worry-free home purchase plan, select an electricity provider, or book flights and hotels. By using DBS PayLah!, the bank also orchestrates payments to third parties for such items as movie tickets and insurance.
- C means Create in a complete white space. This is where no real player is out there; instead, the bank initiates the platform. An example of a created app is Smart Buddy (explained below), which has morphed into an educational ecosystem.
Entry into successful marketplaces
DBS sought to make banking more seamless and joyful for customers when purchasing property. Today, it also sells cars and holidays. Just a few years ago, imagine what consumers would have thought about buying a car from their bank!
- Property Marketplace
Singapore has a vibrant property market. Launching a new Property Marketplace platform allowed the bank to be more innovative in offering adjacent services beyond mortgages, including insurance and renovation loans. Today, customers can browse online to find multiple property agents and sites. With its mortgage calculator, Property Marketplace helps them make early-stage calculations on mortgages so they can weigh their options. They can also acquire Approval in Principle and facilitate other aspects of their mortgage journeys.
- Car Marketplace
The government of Singapore places a high tax on cars (called Certificate of Entitlement or COE). Therefore, approximately 90 percent of car purchases require a loan, which serves to limit the number of cars on the roads. To discourage people from buying cars, the country has an excellent, safe, and reliable public transport system. In Singapore, for example, if a train breaks down at any time, its operator is penalized by the government!
Still, Singaporeans want to own cars. Their need to get loans led to car sellers being paid a high commission when they recommended a bank. The bank, in turn, depended on car sellers for their recommendations. When purchasing a car, thinking about the loan or insurance is not typically a top-of- mind consideration. The DBS Consumer team recognized this as an excellent opportunity to examine the customer journey as well as show empathy to their customers and apply design thinking.
In 2017, an agile squad reimagined the customer journey and launched the Car Marketplace, a platform that centralized customer search efforts for a car with all the different steps easy to access on one website. The launch of Car Marketplace required Singapore’s central bank’s approval since it fell outside of a bank’s traditional and approved parameters.
As a consumer, Car Marketplace allows you to search for and buy your dream car or sell one you don’t want. When buying, the site lets you calculate your budget, view dealers, or buy directly from a seller. When selling a car, the site allows you to price your car and sell it fast. It guides you through the transaction in three steps. The site recommends insurance and offers purchase of roadside assistance and accessories. It also features recommended articles to read before buying and selling goods.
Immediately after the Car Marketplace launch, the bank’s customers realized a significant reduction in the cost of acquiring car loans and insurance as well as an efficient back-end process. Today, DBS’s Car Marketplace is the largest direct seller-to-buyer car market in Singapore.
- Travel Marketplace
Travel Marketplace is the bank’s first payments-enabled marketplace. It was also Singapore’s first one- stop integrated travel marketplace in partnership with Singapore Airlines, Expedia Partner Solutions, and Chubb Insurance. The Travel Marketplace offers travelers competitive flight fares, hotel rates, and free travel insurance coverage for more than 25,000 holiday destinations worldwide.
- Electricity Marketplace
Through the bank’s Digibank app, heads of households can search for utility price plans best suited to their electricity consumption. This app is aimed at making life simpler for customers while enjoying savings on their bills.
Platform is the new product
The Digital Wave drove the move from product to platform across the bank. The move focused on scope and scale—from developing the best products to developing the best networks. DBS’s move from product to platform came with these three challenges:
- Acquiring customers through partners. Going further upstream in the customer journey created more opportunities to capture new customers through partners. When a consumer wants to buy a car, for example, the loan can come from DBS. This is even more critical in the markets where DBS has little physical presence (such as in India and Indonesia) and fully depends on digitalization to connect with its customers. By working together, both parties reduce their cost of customer acquisition.
- Gathering non-traditional data from partners to make credit decisions. The bank gathers data on its customers. The non-traditional data it has on customers provides more accuracy, granularity, and actionable data for making decisions. For customers new to banking or credit, it is imperative to have other sources of data (this can come from travel patterns, telco data, or other external sources) to be able to make decisions on lending. To access this sort of data, DBS has to partner with related firms that then become part of its ecosystem.
- Enhancing product offerings through partners. Collaborating with partners unlocks greater revenue opportunities from customers that the bank did not access before. For example, previously, DBS would only look at the house-buying customer journey in terms of the mortgage application Today, its Property Marketplace provides listings from partners. It also smooths out the customer journey by integrating the mortgage calculation and affordability assessment into the experience.
Building ecosystem partnerships
Building successful ecosystem partnerships requires an investment in time, mutual commitment, and openness to collaboration. It also takes resilience and belief to build traction and reach inflection points. To this day, as DBS improves the customer journey, it can be challenging for the bank and its partners to identify an equitable value exchange. The ecosystem partnerships that work best happen when both parties benefit from working together more or less equally. Each partner must also share a mutual commitment to offering customers a better experience as well as being open about data collaboration.
As the bank advances its efforts in connecting adjacencies, its aim of Making Banking Joyful becomes embedded in its customers’ lives. A pain point that the bank has been able to address for both consumer and corporate customers is onboarding. For corporate customers, this process used to take an average of 45 days in the industry. But now, by making the procedure seamless and paperless by adopting digital signatures and with open APIs, the bank has reduced it to under six days. Traditionally, this process involved submitting numerous physical documents and multiple iterations between the bank and the customer onboarding. The use of AI and machine learning eliminates duplication and manual processing.
Another ecosystem-related idea which helped DBS build momentum was POSB Smart Buddy. At the start of the implementation of the digital transformation, DBS CEO, Piyush Gupta, was driving every part of the bank to challenge the status quo and think differently. As part of its responses to the CEO’s challenge, the Consumer bank addressed the customer pain point of parents scrambling in the morning to give their children lunch money. The solution not only made the morning rush more manageable but eventually resulted in Singapore children eating less sugar!
Adopting agile methodology, the team developed a wearable watch for schoolchildren that let parents pass children their lunch money digitally. It’s called the Smart Buddy. To create this app, the agile squad experimented over an intense 18-month period using pilots at three schools.
Digitalization is not always about inventing a product but about creating a platform. In this case, giving schoolchildren a wearable watch for digital credit was useless if vendors could not accept their payments. So, the team went to individual food and beverage vendors at participating schools and encouraged them to adopt cashless transactions. During the pilot in 2016, though, the team realized numerous food and beverage vendors had their own apps. Finding, downloading, and using different apps was not attractive to them. To resolve the problem of being inundated with apps, the team pivoted to Facebook Messenger, which most of their customers used. Facebook Messenger now lists all the different vendors participating at the children’s schools.
In August 2017, POSB Smart Buddy was launched as a contactless payment ecosystem to cultivate sensible saving and spending habits among students in an interactive, engaging way. It not only resolved the issue of parents scrambling to give the children lunch money; it also tracked what food items their children were buying at school.
Smart Buddy analytics revealed the kids’ eating habits, paving the way for parents to educate their children on eating healthily and spending money wisely. The Singapore government became interested in Smart Buddy, as it was looking to improve eating habits among children. The data also translated into defining trends and discovering insights.
Since Smart Buddy’s launch, more than 29,000 schoolchildren have been using the free wearable watch, and 62 schools have joined the initiative. Within DBS, the success of Smart Buddy became an early catalyst for the Consumer team to rethink its whole offering, shifting from selling products to creating platforms. Smart Buddy is not a digital wallet product; it is a platform that interconnects customers (schoolchildren) with vendors. In Singapore, those vendors also include libraries and bookstores. Not only does Smart Buddy allow parents to track their children’s eating and buying habits, but it also gives the Singapore Health Promotion Board (HPB) data that can help reduce sugar intake for school children. HPB provides nutrition tips that encourage healthy living. Another DBS ecosystem is born.
Robin Speculand is a pioneer and expert in strategy and digital implementation. He is driven to transform strategy implementation globally by inspiring leaders to adopt a different mindset and approach. The founder of three companies and three business associations, Robin is CEO of Bridges Business Consultancy Int. and co-founder of the Strategy Implementation Institute and the Ticking Clock Guys. Robin is also a TEDx presenter and facilitator for IMD, Duke CE, and Singapore Management University, and a prolific best-selling author. He is author of World’s Best Bank: A Strategic Guide to Digital Transformation (2021).
Robin Speculand, World’s Best Bank: A Strategic Guide to Digital Transformation (2021).
DBS, “Pivot or Perish: Ecosystem, the emerging business model,” DBS.com, January 10, 2019, https://www.dbs.com/aics/ templatedata/article/generic/data/en/GR/012019/190110_insights_blackbook_pivot_or_perish.xml.