As the information age progresses, businesses are converting more and more of their operations to digital formats. This process of digitalisation allows companies to streamline their management and reduce day to day running costs. Singapore continues to lead the way in digitalisation in Southeast Asia, as reported by studies commissioned by DBS bank: the 2019 inaugural Digital Treasury Index and the 2020 Digital Treasurer survey. Businesses in the city-state have been investing in digitalisation for some time, and the figures bear this out.
Digitalisation in Singapore gives firms more flexibility when it comes to pricing, sales, and customer acquisition, playing a vital part in marketing strategies. Now more than ever before businesses need to plan and implement digital marketing plans to engage with their customers.
Digital transformation is key
The 2019 report finds that 29.5% of Chief Financial Officers (CFOs) and corporate treasurers view themselves as “increasingly responsible for pushing” their businesses towards digitalisation. In contrast, 43.6% of those surveyed felt the technology management and staff are responsible, rather than themselves. However, only 11.3% of respondents said that digital transformation was the CEOs’ responsibility. Amongst CFOs and corporate treasurers, 44.1% noted, in addition to driving the digitalisation agenda, they are also working closely with their companies to drive the execution of these plans.
Pre-COVID digital transformation was happening at a snail’s pace. Move forward 12 months and digital transformation is essential to survival.
Within the Asia-Pacific region, the survey found that seven out of ten companies risk falling behind due to underdeveloped digitalisation strategies, or weak execution plans. Here, once again, Singapore leads in the region, as only 59% of companies lack a robust digital transformation strategy.
The Group Head of Global Transaction Services at DBS, John Laurens, stated that digitalisation is causing widespread disruption to global industry. “More and more, companies have come to understand that digital transformation involves a complete transformation across their organisation – from front-end sales engagement to back-end operations. And this requires the involvement of every part of the company’s organisation. We are seeing more and more CFOs and Treasurers being called upon to drive this change because they have broad oversight and in-depth understanding of key business drivers and organisational challenges.”
DBS’s survey also goes into detail on the factors that work against digitalisation. CFOs and corporate treasures cite three major risks: the most prominent was the speed of change and complexity of the technology necessary for digitalisation, creating barriers to the proper execution of digital transformation strategies.
The second most common barrier noted was the challenges of executing digitalisation strategies and delivering effective outcomes. And the third perceived challenge was the paucity of talented individuals necessary to implement digitalisation successfully.
Laurens continues, “It is interesting to see CFOs and treasurers deal with some of the new Fintech risks emerging as a result of the digital push by business leading to reliance on banks to help mitigate such risks. What’s more, they are demanding new ways to connect to banks such as through APIs (application programming interfaces) where the connection is both direct and instantaneous.”
Digitalisation trends: Scope and challenges
The 2020 survey found that around 45% of Singapore companies have what they describe as a “well-defined strategy” regarding digitalisation, the highest in APAC, followed by Hong Kong and Japan at 44% and 41% respectively. The lowest-ranked countries were the Philippines and Vietnam at 10% and 8%.
However, overall, companies in APAC fall far behind their counterparts in the west. Only 20% of companies across APAC have a well-defined strategy, compared to nearly half in the UK and the US. There are many factors in the drive towards digitalisation, including perennial issues like supply chain disruption, as well as the consequences of the global COVID-19 pandemic, which has created a major incentive to digitise across many industries. Thus, an overwhelming 99% of businesses reported that they are facing external pressure to digitise.
The two largest areas for investment amongst the APAC businesses have been cash management at 33%, and supply chain financing at 30%. This pattern can be seen in the UK also, where 60% of businesses are investing primarily in trade and supply chain financing-related tech. In the US, however, companies are focusing their investments on risk and compliance reporting and cash management solutions, at 34% and 26% respectively.
Last year’s survey found that 69% of APAC businesses prefer to partner with banks to keep up to date with fintech innovations and identify solutions, and this remained steady in this year’s report, with seven out of ten companies citing this preference.
There is immense pressure for companies to transform digitally, responding to uncertain markets, disrupted supply chains, as well as the intense demand for digital services imposed by the coronavirus and resulting lockdowns. Nearly every company is feeling the pressure, and while APAC countries lag the UK and US in their preparations, digitalisation in Singapore and Hong Kong isn’t far behind.