Digital Transformation a priority for Indian Large Corporates and Mid-Market Companies, finds DBS Survey

The third edition of the DBS Digital Readiness Survey has revealed that there has been continued momentum in digitalisation efforts by businesses across the Asia-Pacific (APAC) region; however, there remains room for further improvement. The global pandemic and the subsequent lockdown accelerated the digital journey for corporates and Small & Medium Enterprises in India.

Previously known as the DBS Digital Treasurer Survey, the study was conducted in June 2021 and involved around 2,600 corporate treasurers, CEOs, CFOs and business owners across 13 markets in APAC – India, Australia, China, Indonesia, Japan, Hong Kong, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam- as well as the US and UK.

The survey showed that nearly half (48%) of large corporates (companies with an annual turnover of over USD 1 billion equivalent) and middle-market companies (annual turnover of between USD 200 million and USD 1 billion equivalent) in India have a digital transformation strategy in place. The APAC region has witnessed seven in 10 (70%) large corporates and middle-market companies with a digital transformation strategy in place, with Taiwan leading the way at 95%. This is a marked increase from last year when the proportion of APAC businesses with a digital strategy was only 57%. There was also a significant jump in the proportion of businesses with clearly defined digital strategies — to greater than three in 10 companies (35%) from 26% the year before.

In India, the survey reports that 62% of the large corporates and middle-market companies are in the formative stages of digitalisation.  They have so far developed their digital roadmaps and are rapidly ramping up their efforts.

Divyesh Dalal, Head – Global Transaction Services, DBS Bank India, said, “If there was any doubt about key benefits of digitalisation, the pandemic has only eliminated it. Embracing digital transformation is no longer a ‘good to have’ but critical for corporate entities to maintain a competitive edge and improve business drivers. We are witnessing a rapid pace of technological innovation, which will come with its own challenges around adoption and implementation. At DBS, we provide enabling solutions to our clients by leveraging our digital-first capabilities across flow products.”

SMEs in India are making steady digital progress to match pace with peers in other markets
Small and medium-sized enterprises (SMEs) make up more than 96% of all Asian businesses[1]and are integral to the success of the region’s economy. To better understand their needs, the DBS Digital Readiness Survey was expanded this year to garner insights from more than 1,000 small and medium-sized enterprises[2] (SMEs) across six APAC markets (including India) on where they are in terms of digitalisation.

In terms of digital progression, SMEs in Singapore are the pacesetters with 72% having a digital transformation strategy in place, followed by Hong Kong (47%), China (44%), Taiwan (38%), India (25%) and Indonesia (20%). However, Indian SMEs have digitised 23% of their payment collection volumes, up from 18% a year ago. The figures reveal that digital channels are on the rise and suggests that SMEs are making progress in their digital journey in the face of the pandemic.

Sudarshan Chari, Head – Business Banking, DBS Bank India, said, “A rise in the adoption of digitised payment collection amongst SMEs in India is an encouraging indicator of the value these businesses see in digitalisation. More than half of these SMEs identified banking relationships and apps as the function they would focus on during their digital transformation journey. This reliance on the banking provider for help and guidance highlights an immense opportunity for market education and bridging the resource gap. At DBS, we will continue to innovate and introduce seamless, digital banking solutions that cater to the banking needs of this segment.”

Pressure to digitalise and barriers to digital adoption for companies
As the pandemic accelerates the demand for contact-free services and questions regarding the resiliency in supply chains, virtually all large corporates, middle-market companies and SMEs in India have indicated that they face external pressure to transform digitally. Key external pressure driving the need to change for large corporates and middle-market companies arises from growing supply chain complexities (32%) and customers and key market demand (28%). 34% of SMEs in India cited growing supply chain complexities as a source of digitisation pressure.

However, the challenges to digital adoption vary across large corporates and middle-market companies and SMEs in India. The former segment listed cybersecurity issues (54%), availability of digital talent (53%) and cost (51%) as the top barriers to the adoption of new technology in the organisation. For SMEs, the high costs of adopting new technology (80%) was the leading challenge.

Amongst cybersecurity concerns, DDoS attacks (77%), cloud infrastructure security (76%) and theft of customer data (72%) were the most concerning issues identified by more than half of the large corporates and middle-market companies here.

The pandemic-induced supply chain disruptions and cash flow interruptions have highlighted the importance of digitising these core banking and finance operations. In terms of digital spending, around half the large corporates and middle-market companies in India cited that trade and supply chain financing (82%), ongoing cash management (58%) and back-office operations (55%) represent the three most significant digital investment areas. 63% of Indian SMEs are investing in new technology solutions for cash management. Interestingly, India is one of the bigger markets in APAC, where SMEs invest more in new tech solutions to develop cross-border payments and FX capabilities.

Trends ahead – Digital and sustainability
The use of smart contracts / digital ledger technology (DLT) and the use of APIs to embed banking products and services into key digital touchpoints have been identified as the most valuable technologies and outcomes by large and small businesses in India. For example, API connectivity with banks is expected to flourish over the next 12 months, with 39% of SMEs and 80% of large corporates and middle-market companies looking to adopt APIs in their banking connections.

In terms of digital support, banks remain the preferred partner for businesses in India for keeping pace with fintech innovations and finding the right digital solutions, with 89% large corporates and middle-market companies as well as 81% SMEs citing this as a preference.

Both large and small organisations believe that not digitalising can constrain growth plans. Other organisational risks identified include a loss of competitive advantage and talent retention and engagement.

While investment in sustainability/ ESG-related new technology has not entered the mainstream, it is pipped to be the next growth frontier, with spends allocated towards this aspect forecasted to grow. In leading markets like the UK and the USA, just one in four businesses invest in ESG-related new technology solutions, compared to 17% in APAC.