POSB: Then And Now

Source : The Straits Times, Mon, Sep 03, 2007

FOR more than a century, POSB has stood as the champion of the small saver.
But it is how the bank and its staff go out of their way to help customers that makes it much more than just a place to store cash.

Back when POSB was a statutory board, old illiterate customers would approach tellers for help to read letters sent to them by the Government, POSB stalwart Chua Bee Choo recalls.

And for those who were too sick to go to the bank, staff would literally go the extra mile to the hospital or home to help the account holder complete the transaction, says another long-serving POSB employee Lili Chee.

Today, the bank is a commercial division of DBS Bank and may appear to some as little different from any other retail bank. But it remains, for scores of Singaporeans, still the People's Bank.

Founded in 1877 as the Post Office Savings Bank by the British colonial government, POSB has always been a key promoter of thrift among the general population. Those early days are still fondly remembered by older Singaporeans who recall saving with the bank in their schooldays.

'When I was a schoolboy in the 1930s, we were encouraged to save our pocket money by buying and pasting postage stamps on POSB cards,' says retired shipping businessman and regular Straits Times Forum page letter writer Lee Kip Lee.

'Once the card was filled with stamps, we would present it to the post office to credit our POSB account.'

Mr Lee, the father of local musician Dick Lee, also recalls that withdrawals were not instantaneous. 'To discourage spending, withdrawals in excess of $25 meant having to obtain approval from the Malayan higher authorities in Kuala Lumpur and thereby took more time to process.'

The focus on thrift continued when the bank was made a statutory board in 1972.

The Singapore Government then saw the bank's potential to promote the saving habit among Singaporeans, which would create a key source of financing for public infrastructure.

Under the new mandate, reforms, especially to ease the withdrawal of deposits, were made. Meanwhile, the bank started to computerise its operations, an industry first then.

It was also at this time that POSB developed a separate identity from the postal service. The familiar blue-and-yellow key logo was born, as was the POSB Girl later in 1977 - she was the approachable bank officer who cared more about helping customers than earning commissions.

'We were part of the public service and we were very enthusiastic and passionate about working to better the lives of the people,' says Ms Chua, who joined the bank 32 years ago.

The transformation was a big success and over the next 26 years, POSB cemented its position as the People's Bank, offering convenient, low-cost services with a rock-solid guarantee from the Government.

The bank was also at the forefront of a number of industry innovations, including the Giro electronic payment system, direct salary crediting and the automated teller machine (ATM), of which it had the biggest network.

Its home-loans arm, Credit POSB, was also a huge success as many homebuyers took advantage of its lower interest rates. Set up in 1974, it was formed to encourage home ownership and to stimulate the property market after the oil crisis in the previous year.

That era came to an end in 1998 when POSB was acquired by DBS, as the Government sought to give the commercial institution enough muscle to become a regional financial powerhouse.

While some rivals were miffed that they were not given a chance to bid for the popular bank, the biggest outcry came from the man in the street. Over the next few years, many Singaporeans spoke against the merger and against POSB's new parent.

After the conversion to a full commercial bank, home-loans borrowers had to wave goodbye to the cheap mortgages they had been enjoying.

Also, a government tax change meant that POSB was no longer the only bank with tax exemptions on interest paid to savers.

The introduction in 2000 of monthly service fees for small accounts drew further flak, as depositors were incensed that the bank would sacrifice poor Singaporeans for its bottom line.

This came despite the fact that exemptions are made for more than a million accounts of the young, the elderly, full-time National Servicemen and recipients of social welfare benefits.

An ongoing shutdown of POSB branches and ATMs raised fears that the bank's new owners might drop the much- loved name in favour of a more unified brand.

For POSB staff, it was a tumultuous time as they feared for their jobs and the end of a warm, family-like work environment that they had enjoyed for years.

'I can't kid anybody. POSB staff were very proud of the POSB tradition and if they had a choice, they would not want to leave the bank,' says Ms Chua. 'We had tears...a lot of tears.'

The $1.6 billion deal was not a shoo-in success for DBS either.

Integration of the two giants, with their very different cultures, was difficult and POSB was no money-spinner then.

DBS said in 2002 that the POSB franchise was bleeding $44 million a year as the bank was unable to cover the cost of serving small customers.

Critics say that DBS neglected and underinvested in the POSB brand during those early years after the merger.

But DBS regional consumer banking head Edmund Koh dismisses the notion that DBS had ever considered dropping the POSB name or its mandate to serve the average Singaporean saver.

'DBS had every intention to preserve POSB but didn't communicate that explicitly. This resulted in much misunderstanding from many interest groups, from grassroots organisations to the media.'

Indeed, rejuvenating the People's Bank has been a key priority since Mr Koh joined DBS six years ago.

The bank started to open new POSB branches while refurbishing existing ones, spending several million dollars in the process. It also set up a new division in 2002 to take special care of the POSB franchise.

Major change
BUT a bigger transformation has been taking place in the past two years. While few can miss the external makeover of the 49 branches, more significant is the change in the way DBS is approaching the POSB brand and business.

More than just a distribution network for DBS products, POSB is now seen as a valuable and moneymaking division to be developed in its own right.

While still a favourite among small depositors, more than a handful of accounts go into the millions, requiring a reconfiguration of the bank's passbook printing machines which could print up to only six-digit sums previously, says Mr Koh.

'Just like you wouldn't eat hamburgers every day, you can't go to Les Amis every day,' he says, referring to the upmarket French restaurant.

The bank now has its sights on revenue growth, and aims to achieve this by cross-selling more sophisticated products to its customers as their banking needs grow with their aspirations.

To do this, the new-look outlets are on average two to three times bigger than their predecessors. This is to provide more space for bankers to have the longer private discussions required to sell wealth management services.

Broader reach
THE move to go beyond basic savings is paying off. The proportion of deposits at POSB that go into investment products such as unit trusts, has doubled to 20 per cent over the past several years.

And the cost-to-income ratio has fallen from 99 per cent to 60 per cent - and is still falling.

At the other half of the equation, POSB continues to keep a tight rein on costs. For example, top DBS and POSB staff spent hours behind a teller's desk to optimise the counter's design, standardising stationery and furniture to help reduce refurbishment costs.

POSB chief Davy Wee, hired to lead the bank in 2004, proudly declares that the $35 million transformation it is embarking on is comfortably below the initial $57 million budget.

Mr Wee, a former McDonald's executive with more than 20 years of mass retail experience, also helped put in place a sophisticated planning tool for the bank's branch network.

Using a matrix of 16 factors, such as demography and human traffic, the tool has helped the bank streamline its network to serve each district more efficiently.

For example, the Tiong Bahru branch was moved from its cramped location opposite the wet market to a larger outlet next to the MRT station at Tiong Bahru Plaza.

Beyond the dollars and cents, the other half of the new strategy is to tap the wealth of goodwill and trust it has accumulated over the years. Its upcoming publicity drive will feature emotive ads designed to tug at the heartstrings.

Reviving the iconic POSB Girl, the TV advertisements feature images of warmth and family as Dick Lee's 1998 National Day song Home plays in the background.

Down at the branches, small touches like greeting customers with 'Welcome to your bank', help make them feel that the bank is there primarily to serve them.

Staff are trained to greet and offer help to any customer within 2m of them. On rainy days, they also lend customers their own umbrellas rather than corporate ones - a decision they made and one that goes some way to winning hearts, says Mr Wee.

Says Ms Chua: 'The service culture in POSB hasn't really changed much. There is still a core group of the old guard who now acts as good role models for the younger staff.'

Each branch is also encouraged to engage the local community.

During the relaunch of the Tiong Bahru branch, for example, food from famous hawkers in the area was served while at Bras Basah, a jazz band formed by Singapore Management University students kept guests entertained.

'We are neighbours first, bankers second,' says Mr Wee.

POSB's down-to-earth approach can also be seen in its products. The Everyday credit card launched two years ago was a big hit, with 150,000 sign-ups in the first year - half of whom were new card customers to DBS and POSB.

The card was unique in that it focused on down-to-earth things such as utility bills and groceries.

Ultimately, Mr Wee says that the basic rules of mass retail apply, be it serving hamburgers or selling mortgages.

'People just want to come in to a very pleasant environment, be served very quickly with products that are simple to understand.'

POSB's latest renewal comes just in time as rival banks have recently made big moves into the mass banking arena.

Global giant Citibank caused a stir last December when it hooked up with SMRT Corp to set up branches and ATMs at train stations, while launching a co-branded credit card.

This was followed soon after by OCBC Bank's February tie-up with NTUC FairPrice to offer no-frills banking services. The bank has also embarked on a $150 million revamp of its 60 branches in Singapore and 29 outlets in Malaysia.

It is still early days to see how these challengers will fare. But DBS is confident that the edge remains with POSB.

On the rising competition, Mr Koh said that POSB's established customer base and infrastructure are key advantages in the mass banking sector where size and presence matter.

'To build an infrastructure is very difficult. We have inherited one and we are reinforcing it thoroughly. I'm glad that competition comes from not one but from many because they will hopefully dilute themselves,' he said.

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Key milestones

1877: Founded as the Post Office Savings Bank by the British colonial government.
1972: Made a statutory board by the Singapore Government.

1977: Created POSB Girl.

1998: Taken over by DBS for $1.6 billion and converted into a full commercial bank.

2002: New division created to take special care of the POSB franchise.

2007: Spending $35 million on a makeover to transform its branches as well as a major ad campaign.