Majority of corporates across the region now have a digital transformation strategy in place; with the largest increase in clearly defined digital strategies on record; but many remain in nascent stages of developing and implementing digital strategies

The third edition of the DBS Digital Readiness Survey* has revealed that although there has been continued momentum in digitalisation efforts by businesses across the Asia-Pacific (APAC), there remains room for further improvement. 

The research showed that seven in 10 (70 percent) large corporates and middle-market companies** in APAC have a digital transformation strategy in place, with Taiwan leading the way at 95 percent, followed by Singapore (91 percent), China (87 percent) and Hong Kong (86 percent). This is a marked increase from last year, when the proportion of APAC businesses with a digital strategy was only 57 percent. There was also a significant jump in the proportion of businesses with clearly defined digital strategies, accelerating by 32 percent year-on-year, to greater than three in 10 companies (35 percent) from 26 percent the year before. 

However, about half (53 percent) of large corporates and middle-market companies in the region remain in the nascent stages of digitalisation, citing that they have either just started on developing their digital roadmaps or current plans remain underdeveloped. 
 

"Embracing digital is now a non-negotiable imperative for corporates, regardless of their size. But the digital landscape is rapidly evolving, and businesses have to keep pace with the latest developments while navigating ongoing economic headwinds. The pace of digital technology change makes it challenging for businesses to develop and implement holistic and effective digital strategies."

- Lim Soon Chong, Group Head of Global Transaction Services, DBS

 
SMEs making steady digital progress, but lag behind larger corporates

Small and medium-sized enterprises (SMEs) make up more than 96 percent of all Asian businesses***, and are integral to the success of the region’s economy. 

In terms of digital progression, SMEs in Singapore are the pacesetters with 72 percent having a digital transformation strategy in place, followed by Hong Kong (47 percent), China (44 percent), Taiwan (38 percent), India (25 percent) and Indonesia (20 percent). However, the region’s SME segment lags behind large corporates and middle-market companies in terms of digital readiness with only four in 10 SMEs (41 percent) having a digital transformation plan in place, and one in 10 with a clearly defined digital strategy (12 percent).
 

"Most SMEs in the region recognise the benefits of digital transformation and have a genuine interest in digitalising their businesses. They see going digital as essential for their businesses to survive and thrive in the new normal. But the cost of adopting new technologies and the steep competition for digital talent have been impeding their progress. For some SMEs, there also appears to be a knowledge gap or lack of confidence on exactly where to begin, so it is incredibly important for partners such as banks to not only be providing digital solutions, but also educational resources on where to start and how to progress."
- Joyce Tee, Group Head of SME Banking, DBS

Pressure to digitalise and barriers to digital adoption

As the pandemic accelerates the demand for contact-free services and questions the resiliency in supply chains, virtually all businesses**** in the region (97 percent) have indicated that they are facing external pressure to transform digitally. Key external pressure driving the need to change, arises from customers and key market demand (35 percent), growing supply chain complexities (26 percent) and the threat of competitors (20 percent).

The challenges to digital adoption however vary across large corporates and middle-market companies, and SMEs.

The top three challenges in terms of digitalisation for the respective segments are:

Large corporates and middle-market companies
1)    Speed of change and complexity in the enabling technologies (88%);
2)    Execution complexity (87%); and 
3)    Availability of digital talent (77%).

SMEs
1)    High costs of adopting new technology (63%);
2)    Availability of digital talent (37%); and 
3)    Cybersecurity concerns (23%). 

In terms of digital spend, around half of large corporates and middle-market companies in the region cite that trade and supply chain financing (65 percent), ongoing cash management (56 percent) and sales and distribution channels such as eCommerce storefronts (48 percent) represent the three most significant digital investment areas. For SMEs, their top three priorities for digital investments are sales and distribution channels (55 percent), trade and supply chain management (47 percent) and procurement (47 percent). When it comes to investments in digitalising sales and distribution channels, APAC SMEs as a proportion of their overall technology budgets, invest double that of large corporates and middle market companies (21 percent compared to 10 percent).

The top three focus areas are in contrast with the US, where seven in 10 (67 percent) businesses are prioritising their investments on risk and compliance reporting and sales and distribution channels, and six in 10 (59 percent) on customer relationship management and servicing. In the UK, digital spend is focused on sales and distribution channels (73 percent), followed by trade and supply chain financing (69 percent) and customer relationship management and servicing (63 percent).

Trends ahead – Digital and sustainability

The use of APIs and smart contracts is expected to continue gaining traction among businesses large and small across the region. 90 percent of APAC businesses see the use of smart contracts, and 82 percent view APIs, as a critical ingredient in their digital strategies ahead. As an example, API connectivity with banks is expected to flourish over the next 12 months, with 56 percent of SMEs and 65 percent 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 APAC, for keeping pace with fintech innovations and finding the right digital solutions, with close to eight in 10 businesses (85 percent) citing this preference (up from 69 percent in 2020)*****. 

Sustainability is also pipped to be the next growth frontier with businesses allocating greater digital spend towards ESG purposes over the next 12 months******.

Among the larger corporates which currently invest in digital solutions for ESG purposes, six in 10 expect to leverage digital tools to map out their financing requirements and meet investor requirements in relation to their ESG agendas, while 52 percent are investing in technology to offset their carbon footprint through the trading of carbon credits. 
 

"There is now an increased expectation on companies to adhere to better business practices that will lead to measurable sustainable outcomes. Businesses are seeking to leverage digital solutions for their sustainability drives, including efforts to record sustainability identifiers and to proof sustainable transactions using digital forms. We are actively partnering with our clients and industry partners to co-create these digital solutions."
- Lim Soon Chong, Group Head of Global Transaction Services, DBS
 

Trends ahead – Digital and sustainability


* Previously known as the DBS Digital Treasurer Survey, the DBS study was carried out by East & Partners.
** Large corporates refer to companies with annual turnover of over US$1 billion equivalent. Middle market companies are defined as companies with annual turnover of between US$200 million and US$1 billion equivalent.
*** Asian Development Bank
**** Comprising large corporates, middle-market companies and SMEs
***** SMEs were not surveyed in last year’s (2020) study.
****** SMEs: from 1.9% to 2.2% / Large corporates and middle-market companies: from 5.2% to 5.9%

About the research

DBS has partnered East and Partners (East) to continue its Digital Readiness Survey for the third round. This research, designed to chart the progress in businesses’ efforts in all things digital, is based on direct interviews with 1,503 treasurers from the Top 100 revenue ranked corporates (US$1Bn plus revenue equivalent) and middle-market companies (US$200mn-1Bn revenue equivalent) across US, UK and 13 markets in Asia Pacific including Australia, China, India, Indonesia, Japan, Hong Kong, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam. Covering businesses across the entire spectrum, this research also, for the first time interviews 1,050 CFOs and CEOs from SMEs (US$20mn-200mn revenue equivalent) across six markets in Asia Pacific including China, Hong Kong, India, Indonesia, Singapore and Taiwan.