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DBS Bank CIO: Think digitization changed personal finance? Wait till IoT hits banking

DBS Bank DBS Bank
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ATMs that know when they are about to break down? Smart watches that help people make better budgeting decisions? Neil Cross knows IoT is evolving banking.

Neal Cross has a nicely visual way of thinking about the Internet of Things (IoT). “For me, the IoT turns a black box into [a] transparent box,” he says. “In black box scenarios, you can’t see inside the thing. But with IoT, you can. And that insight will drive efficiency, which will reduce cost for many of the things we consume today.”

Cross should know. He’s chief innovation officer at Singapore’s DBS Bank. It’s south-east Asia’s biggest bank by assets, but these days it’s best known for its pioneering digital services. In fact, the company was recently named best digital bank in the world by Euromoney Magazine.

Today, DBS Bank says its digital customers bring in S$3.1B of revenue a year against S$2B for non-digital, and account for two-thirds of the bank’s gross profit.

Clearly, the virtualization of DBS’s banking services is on-going. But Cross argues the next big opportunity lies in bringing together digitization with real world objects. In other words: the IoT.

“There’s a lot of focus on digitization,” says Cross. “But there are obviously physical objects in the world. Connecting the physical to the digital is a massive opportunity for the future of how we work, play and get educated.”

One way to think about the coming era of smart devices is with an analogy to the industrial revolution. Around 150 years ago, people started to outsource muscle power to machines. Instead of pushing a plough (or getting a horse to do it), we passed the job to a petrol powered tractor. Result? Immense cost and time savings.

Now, we are outsourcing brain power to machines. We are giving previously dumb devices the power to adapt and modify what they do, and to report back the results.

DBS Bank is already experimenting. Cross gives an example of how it ‘cognified’ its ATM fleet. “We partnered with the Singapore research group A*STAR to look at the sensors we put in our ATMs,” he says.

“We know that ATMs occasionally fail – they are mechanical devices after all. So we used AI and machine learning to analyze ATM data we’d never really looked at before. And what we found is we can predict what part of an ATM will fail and when. That means we can fix it before it breaks down, so our customers don’t experience any down time.”

In its pioneering work on IoT, DBS Bank is leading a drive is gathering momentum across Asia. Forrester Consulting says 58 percent of APAC enterprises are either implementing or planning to implement IoT over the next 24 months. It says APAC spending on IoT will hit US$59B by 2020.

Self-evidently, this growth is being powered by a special combination of smaller sensors, better connectivity and faster data processing.

This means that smart machines don’t have to be big, bulky and fixed like ATMs. They can be portable. This wearables space is another that DBS is exploring as part of its mission to re-think banking.

“We see this as a new way to engage with clients,” says Ross. “The fact that many of them are wearing internet connected watches, for example, means we can offer banking services through that device.

“Secondly, the way we understand customers can be different as well. We can get more information, with their permission, about what they do in their lives so we can offer them friction-free and contextualised financial products.”

It already is.

Last year, DBS Bank launched the POSB Smart Buddy programme across 19 primary schools in Singapore. It gave students a connected watch to help them track their savings and spending habits. The goal was to teach them how to budget wisely. It also gave parents the ability to pre-set their child’s daily allowance, send emergency money, and monitor activity.

To make the system run smoothly, DBS built out a digital payments ecosystem in the schools. This meant students could tap and pay with their Smart Buddy watches.

Lurking in the background, of course, of all these progressive ideas is the need for robust security. Cross concedes that there is work to be done here.

“The industry need to think about the fact that there are new attack surfaces,” he says. “There are thousands of variations of IoT devices, each built to different standards with different data schemes.”

His prescription is to observe the fundamentals of digital security. He says: “We have to go back to the core tenets of security: how are you collecting the data? How are you storing and transporting that data? Are you using standard cyber-security techniques to do that?

“At the moment there are very different transport methods and data schemas happening, and they need to be standardized as this is a great defence against cybersecurity attacks.”

Ultimately Cross says DBS Bank has a responsibility – perhaps more than most – to take the lead on security and privacy.

“Those ones and zeroes in the database are not just financial information. They are people’s lives, their kids’ college funds, their homes,” he explains. “We can’t act like a tech company with people’s information. We have to treat that very seriously, so every we have an incredibly strong cyber security team to make sure we are at the forefront of protecting our clients data.”