ING CEO Ralph Hamers talks to Global Finance about what it has taken for the bank to turnaround after the financial crisis, its digital strategy and the changes expected to disrupt the banking system in future.
Global Fianance: What have been the key factors in ING’s turnaround nearly a decade after the global financial crisis?
Ralph Hamers: From 2009 we focused on our restructuring programme ‘Back to Basics’, aimed at simplifying and streamlining many aspects of our business. Making the company simpler freed up an enormous amount of management time and it increased our agility. As a result, by 2013 we could focus on the opportunities for the future and formulate our customer-centric purpose: ‘Empowering people to stay a step ahead in life and in business’. This statement is all about what matters most: offering a differentiating experience to our customers.
GF: How has your emphasis on making ING the world’s leading digital bank helped you address changing customer needs on a global scale?
Hamers: Key here is to keep in mind that our digital transformation is not a goal in itself. It is only the result of how we think we can remain relevant for our customers and best serve their financial needs.
Partly as a result of the democratising effect of technology, banking products have become more and more commoditised. This holds for both consumer and corporate banking. The features of one savings account or current account versus another are barely different. Recognising this, and inspired by fintechs and digital disruptors in other sectors, I firmly believe that the only way to stand out from the crowd is by offering a superior customer experience.
The experience that customers now expect, driven by their frequent interactions with the likes of Google, Amazon, Facebook and Apple, is one that is personal, instant, relevant and seamless. And also borderless – with a consistent experience no matter where in the world the products and services are accessed from – for B-to-C and B-to-B alike. For banks, that experience translates into one that is clear and easy, available anytime and anywhere, and most of all empowering – putting customers in the driving seat when it comes to their own finances.
GF: How do you balance the risks and rewards of accelerating change and disruption?
Hamers: We strongly believe in converging towards one single banking model, dubbed our desired ‘end-state’, to provide the best client experience in all of our countries. However, implementation through one large programme would lead to high operational risks and significant up-front costs. For Wholesale Banking, we have been implementing this programme since 2010. For the consumer banking side, we have defined an ‘intermediate state,’ which we are working towards in the coming three years, where we will converge by cluster, developing harmonised business models and shared operating models.
GF: What do you see as the main challenges ahead, such as regulation and fintech competition?
Hamers: We do not underestimate the burden of increasing and unpredictable regulation and the impact of changing economic circumstances. But by far the biggest challenge for our sector is to remain relevant for our customers. People still need the services we provide, in payments, savings or by financing large investments.
Doing their personal finances is no-one’s hobby – not even mine. People need ‘banking’ but not necessarily ‘banks’. And a new breed of financial services competitor has emerged to meet that need: the fintechs. These financial technology companies are harnessing (mobile) technology to target specific parts of the financial services value chain, especially those that are inefficient or customer-unfriendly. There’s much to learn from these new competitors. Fortunately, we have the mindset to do just that. We partner with them, setting up accelerators and also launching our own fintechs like Yolt in the UK and Payconiq in the Benelux.
GF: What is the optimal model for ‘the bank of the future’, and how will ING get there?
Hamers: The bank of the future will look very different from today’s bricks-and-mortar banks. When picturing tomorrow, I draw inspiration from the leading digital disrupters of today. The most successful of those are so-called “platform” companies. Alphabet (Google), Amazon, and Facebook are all platforms, and happen to be three of the world’s 10 largest listed companies. Their rapid growth has been enabled by digital and mobile technology, making it possible to achieve huge scale with near-zero marginal costs in connectivity, production and distribution, and often without the need for owned assets. This is the ultimate disintermediation that banks have also experienced in the wholesale banking area.
Translating this to banking, I see a number of key ingredients necessary for sustainable success. I see the bank of the future as one whose purpose it is to empower people, both in life and in business. It uses advanced data capabilities to deepen and expand the customer relationship, rather than enlarging the balance sheet. It provides a differentiating customer experience that is clear, easy, consistent and convenient. It’s a digital platform, where people and companies can easily go to take care of all of their financial and finance-related needs. It also exists as part of a wider ecosystem that goes beyond banking, supported by complementary offerings from third-parties (including other financial services providers). It’s connected to the other platforms and ecosystems where consumers spend most of their online time, providing easy access to financial services where and when users need them. And the glue that binds all of these elements together is culture. A culture with the customer at its centre, and one that lives and breathes innovation, is crucial.
In October 2016, we announced a number of key steps towards that model, to reach what we call an ‘intermediate ‘state. The largest parts of that are the creation of an integrated banking platform in The Netherlands and Belgium, the forming of a ‘model bank’ in Spain, France, Italy, Austria and the Czech Republic, a standardised platform with one delivery organisation, a further enhancement of our digital platform in Germany, and the continuation of our efforts to streamline our customer experience for our Wholesale clients across all products, services and the more than 40 countries across which we are active.