Bank e-FX Initiative of the Year: DBS Bank

Innovation in foreign exchange usually comes from the handful of global heavyweights that have ruled the landscape from the early days of electronic trading, but regional powerhouses are finding corners of the market where their unique geographical presence can give them a strong advantage, with the help of technology.

In recent years, Singapore-based DBS Bank has been at the forefront of digital innovation at its customer banking operations, and it has rolled out its FX auto-pricing and dealing platform for small- to medium-sized enterprises (SMEs) – a segment that received little attention from the global giants.

This initiative earned DBS Bank the crown in the Bank e-FX Initiative of the Year category at the 2016 FX Week e-FX Awards.

"We started looking at our electronic capabilities about five years ago. The price of streaming systems has come down a lot, and although we were latecomers to the e-business, we didn't feel we were missing out before because the business needed to develop, and some areas of the bank needed to catch up and for everyone to pull towards becoming a digital bank," says Peter Soh, managing director, and head of foreign exchange & international locations at DBS Bank.

We didn't want to compete with the big global banks – we just wanted to efficiently distribute our FX to our customers, both internally and externally
Peter Soh, DBS Bank

DealOnline (DOL) is the bank's regional electronic FX auto-pricing and auto-dealing platform for SMEs, corporations and financial institutions. It was envisaged as the flagship e-commerce venue for distributing DBS Treasury's FX products, not only to internal users but corporations and financial institutions as well.

"We didn't want to compete with the big global banks – we just wanted to efficiently distribute our FX to our customers, both internally and externally," Soh says.

The venue supports more than 40 currency pairs in spot, forwards, swaps and Asian non-deliverable forwards (NDFs), and it is available either directly or through multi-dealer platforms. Customers can use DOL as a standalone platform or as part of the bank's corporate internet-banking platform, Ideal, both of which are designed to support the needs of the bank's six key Asian markets: Singapore, Hong Kong, China, Taiwan, India and Indonesia.

As a result, a regional treasurer with operations in these countries can access their account information in a single view and initiate transactions of various currencies across the region easily. This functionality has been available from some large global players, but their commitment to non-core regions, including Asia, has weakened as a result of regulatory obligations and costs.

"The capital situation has given us an uplift, and we have new customers who didn't used to deal with us asking if we can come and deal with you. Clients who would have called large global players have suddenly started coming to us, wanting to deal with us," says Soh.

Electronification steps

Foreign exchange is very much a core product for DBS Bank, especially as the evolution of electronic trading in Asian currencies nears a critical point. Electronification of Asian units has been held back by the lack of a central price-discovery platform for NDFs.

"Over the last year there have been huge developments in this area, and the moment we have this, in the next one to two years we will see Asian currencies streaming quite well when compared with international currencies. I expect a huge burst of development in the electronic trading of these currencies," notes Soh.

"I think, in the next two years, all the units will be overwhelmingly electronic. We have a number of platforms offering emerging Asian currencies electronically already and the moment we have this basis for price discovery, as we are starting to have now, the trend will accelerate, and banks like us will use the growing liquidity on these platforms as aggregate and transparent sources of liquidity used for pricing customers," he adds.

Of course, liquidity might not be as deep and well established as in international currencies, and spreads may be wider and trade sizes smaller than in the euro or sterling, but the ability to stream prices in Asian currencies will become a reality as soon as next year.

DBS stands ready, with Soh stating that in the bank's six key Asian markets, it consistently aspires to be among the top three FX houses in each country, as foreign exchange is one of three core services that customers ultimately want from banks.

"As a bank, what do you really sell the client? Customers want to place deposits with you, they want to take a loan or they want to do FX, especially as online shopping is now so widespread and most transactions there have an FX element. So I think FX will be with us forever. It can be transformed and be seen in different ways, but at the core, it's essentially exchanging one currency into another," says Soh.

"The question is how to do it, but one things is clear: we are going to do it electronically. Voice will be gone, because the only way to do these things is on electronic mediums," he adds.