Singapore, 21 September 2021 – The third edition of the DBS Digital Readiness Survey reveals that despite continued momentum in digitization efforts by businesses across Asia-Pacific (APAC), there is still room for further improvement.
The survey, which involved approximately 2,600 corporate treasurers, CEOs, CFOs and business owners across 13 markets in APAC, as well as the US and UK, showed that seven out of 10 (70%) large and mid-market companies in APAC already have a digital transformation strategy, with Taiwan leading (95%), followed by Singapore (91%), China (87%) and Hong Kong (86%). That’s a real improvement from last year, when the proportion of APAC businesses that had a digital strategy was only 57%. There was also a significant jump in the proportion of businesses with a clear digital strategy — to more than three in 10 companies (35%), from 26% the previous year.
However, around half (53%) of the region’s large and mid-market enterprises are still in the early stages of digitization because they are just starting to develop their digital roadmap or with current plans still underdeveloped.
Lim Soon Chong, Group Head, Global Transaction Services, DBS, said, “Nowadays, embracing digital is a non-negotiable necessity for companies, regardless of size. However, the digital landscape is evolving rapidly and businesses must keep up with the latest developments while navigating persistent economic barriers.
The pace of change in digital technology makes it difficult for businesses to develop and implement a holistic and effective digital strategy. At DBS, our mission is to leverage our digital leadership to support businesses in implementing innovative digital solutions to emerge from these challenging times stronger.”
SMEs are making steady digital progress, but lagging behind large companies
Small and Medium Enterprises (SMEs) account for more than 96% of all Asian businesses, and are an integral part of the region’s economic success. To better understand their needs, this year’s DBS Digital Readiness Survey was expanded to gather insights from more than 1,000 small and medium-sized enterprises (SMEs) across APAC about their position on digitization.
In terms of digital progress, SMEs in Singapore are the pacesetters with 72% having a digital transformation strategy, followed by Hong Kong (47%), China (44%), Taiwan (38%), India (25%) and Indonesia (20%). However, the SME segment in the Asian region lags behind large enterprises and mid-market in terms of digital readiness, with only four in 10 SMEs (41%) having a digital transformation plan, and one in 10 having a defined digital strategy (12%).
Joyce Tee, Group Head of SME Banking, DBS, said, “Most SMEs in the Asian region are aware of the benefits of digital transformation and have a genuine interest in digitizing their business. They see going digital as essential for their business to survive and thrive in the new normal.
However, the costs of implementing new technologies and intense competition for digital talent are hampering their progress. For some SMEs, there also seems to be a knowledge gap or lack of confidence to get started, so it’s very important for partners, such as banks, to provide not only digital solutions, but also educational resources on where to start and how to grow.”
Pressure to digitize and barriers to digital adoption
As the pandemic accelerates the need for contact-free services and calls into question the resilience of supply chains, nearly all businesses in Asia (97%) say they face external pressure to transform digitally. The main external pressures driving changing needs emerged from key customers and market demands (35%), increased supply chain complexity (26%), and the threat of competitors (20%).
However, the challenges for digital deployments vary among large and mid-market enterprises, as well as SMEs.
The top three challenges in terms of digitization for each segment are:
Large enterprises and medium market enterprises
The speed of change and complexity in technology that allows for radical changes in user capabilities (88%);
Implementation complexity (87%); and
Availability of digital talent (77%).
SMEs
High cost of implementing new technology (63%);
Availability of digital talent (37%); and
Cyber security issues (23%).
In terms of digital spending, about half of the large and mid-market companies in the region mention trade and supply chain finance (65%), current cash management (56%), and sales and distribution channels, such as, eCommerce storefronts (48 %) represent the three most significant areas of digital investment.
For SMEs, their top three priorities for digital investment are sales and distribution channels (55%), trade and supply chain financing (47%), and procurement (47%). In particular, in terms of investment in digitizing sales and distribution channels, APAC SMEs as a proportion of their overall technology budget, invest twice as much as large enterprises and mid-market enterprises (21% compared to 10%).
The top three focus areas differ from the US, with seven in 10 (67%) businesses primarily investing in risk and compliance reporting and sales and distribution channels, and six in 10 (59%) in customer relationship management and services. In the UK, digital shopping is focused on sales and distribution channels (73%), followed by supply chain financing and trade (69%) and customer relationship management and services (63%).
Future trends – Digitization and sustainability
The use of APIs and smart contracts (automated contracts, where the terms of the transaction agreement between the buyer and seller go directly into the code line) are expected to become popular among large and small businesses across Asia. 90% of APAC businesses see the use of smart contracts and 82% see APIs as an important component of their digital strategy in the future.
For example, API connectivity with banks is expected to expand over the next 12 months, with 56% of SMEs and 65% of large and mid-market enterprises looking to implement APIs in their banking relationships.
In terms of digital support, banks will remain the preferred partner for businesses in APAC to keep pace with fintech innovation and find the right digital solutions, with nearly eight in 10 businesses (85%) citing it as the preferred choice (up from 69% in 2020) .
Sustainability is also forecast to be the next growth frontier with businesses providing greater digital spending for ESG purposes over the next 12 months.
Among large companies currently investing in digital solutions for ESG purposes, six in 10 expect to use digital tools to map their financing needs and meet financier requirements related to their ESG agenda, while 52% invest in technology to offset their carbon footprint through carbon credit trading.
Lim shared his views on how sustainability is reaching a tipping point globally, and said, “There are currently increasing expectations for companies to adopt better business practices, which will lead to measurable sustainable results. Businesses seek to leverage digital solutions in their sustainability efforts, including efforts to record sustainability identifiers and to prove sustainable transactions using digital forms. We are actively working with our customers and industry partners to co-create this digital solution.”
About DBS
DBS is Asia’s leading financial services group, with a presence in 18 markets, headquartered and registered in Singapore. DBS is in Asia’s three main growth axes: China, Southeast Asia and South Asia. DBS’ “AA-” and “Aa1” credit ratings are among the highest in the world.
DBS is known for its global leadership, being named “World’s Best Bank” by Euromoney, “Global Bank of the Year” by The Banker and “Best Bank in the World” by Global Finance. DBS is at the forefront of harnessing digital technology to shape the future of banking, being voted “World’s Best Digital Bank” by Euromoney and “Most Innovative in Digital Banking” by The Banker. In addition, DBS received the “Safest Bank in Asia” award from Global Finance for 12 consecutive years from 2009 to 2020.
DBS provides a complete range of services for customers, SMEs, as well as corporate banking. As a bank born and raised in Asia, DBS understands the intricacies of doing business in the region’s most dynamic markets. DBS is committed to building lasting relationships with customers and positively impacting society through supporting social entrepreneurs the Asian bank way. DBS has also set up a SGD50 million foundation to strengthen its corporate social responsibility efforts in Singapore and across Asia.
With an extensive operational network in Asia and an emphasis on staff engagement and empowerment, DBS presents exciting career opportunities.
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