Bringing Hong Kong and Singapore together

David Tsui, group chief information officer at Dao Heng Bank, talks about the work underway to turn DBS and Dao Heng into a single, regional bank.

FinanceAsia: What kind of management structure have you put in place to handle the integration, and how is it progressing?

David Tsui: We have formulated a comprehensive and detailed harmonisation plan for Dao Heng and DBS Kwong On, including their business, human resource, operations, technology and systems. Right now we have the harmonisation program in full swing and we are in the first stage of resources planning. The detailed projections on cost savings we have now are actually better than what was estimated in the due diligence process, so we're very comfortable that the merger will have strong benefits.

Have you brought in any outside consultants to help with the change?

We've brought in AT Kearney to help with the management side of this harmonisation process and have a group of their consultants working full time with us now.

What has been decided after evaluating the technology in place at each bank?

For the time being the decision has been made locally to convert the core banking system of DBS Kwong On to that used by Dao Heng because we have a bigger portfolio and our product offering is richer than Kwong On's. Having said that there are some regional platforms that DBS will roll out - for instance, the treasury and markets system, Murex, will be rolled out for Hong Kong. So will be the PeopleSoft general ledger and HR system. For Dao Heng Bank we will also migrate our card system to a new one called Vision Plus from PaySys.

We are in the planning process of moving some of the other operations to Singapore, for instance remittance and treasury, but others will be centralized in Hong Kong, such as trade finance. We have to identify where we have the most appropriate skills and leveragable scale of business. All these arrangements will be subject to HKMA's approval.

Consolidating the two mainframe centres brings quite a lot of cost savings, because even just the operating system required can cost over US$1 million a year. We are now at the stage of deciding whether we should have the host in Singapore, but the client server systems will of course remain in Hong Kong.

A few months ago a hardware failure at HSBC that disabled branches and ATMS for several hours brought into the public eye the issue of redundancy. What kind of back-up considerations have you made with your systems?

We have redundancy and hot back-up right now in Hong Kong. The issue is that we have to have better checking on the drills and training involved with this kind of situation so everyone knows what steps need to be taken. You really cannot afford to have down time.

DBS executives cited the customer relationship management (CRM) expertise at Dao Heng as one of the reasons they were interested in it. How is your expertise in this area being assimilated into the newly merged entity?

One has to make it clear that for CRM there are two parts. There is the operational side and then the analytical side. Operationally both DBS and Dao Heng have been using Siebel for things such as call centres, sales tracking and contact management. This similarity in systems was a happy coincidence and one of the reasons DBS was interested in Dao Heng.

On the analytical side we have been using NCR's Teradata, and I think we will continue to use it. Whether we roll that out to DBS we don't know yet. So far our people have been very happy with the analytical CRM we have, especially the infrastructure we have built. If you talk to the division managers in the marketing side or the business side they always say how they appreciate having solid scientific data to work on.

CRM is a journey that should be done step by step. You have to clean the data first and get an infrastructure in place where you can use that extracted data very quickly for a range of different purposes.

Some banks go in without looking at the data and say they want to do a loyalty program or campaign management. Of course they can do this, but doing this exercise might take three weeks to three months because they haven't laid the groundwork. For us, with all the infrastructure in place, we can do it in a matter of days.

What tools will you add to your analytical CRM infrastructure in the next stage?

In phase one, which started several years ago, we started with segmentation, a single view of each customer, ad-hoc analysis and analysing the profitability and preferred channels of customers.

Phase two has included credit processing management control (CPMS), analysing risk rates of customers and groups and how we can reduce our credit risk and keep quality control on our portfolio. We also have dynamic relationship management - relating individuals back to certain behaviour groups, or to their household and things like that - and event triggers.

In the next stage we want to bring in retention models and scoring for different categories such as risk, credit and behaviour. For example, if a customer's card repayments have been delayed or short for the past few months, that warrants a certain risk score. If they have been withdrawing more cash from the ATM than usual, that might also have an effect. We already have some credit and behaviour scoring tools, but they are just applied to credit cards and not yet to the wider CRM system.