FINTECH: FRIEND OR FOE?
Ralph Hamers @ Money2020 Europe | 06 April 2016 @ 12h55
Good afternoon ladies and gentlemen. And thank you to Money2020 for inviting me to speak here today
I know that there are some bankers who feel like an endangered species especially when confronted by a room
this size mainly filled with fintechs and other entrepreneurs…
Certainly there are many banks that view fintechs as a big threat. The likes of McKinsey and Accenture have
contributed to that feeling with claims that 30 – 40% of banking revenues are under threat from fintechs and
banks should feel threatened because we can do a better job. When we surveyed our customers before
launching our Think Forward strategy they told us: “We need Banking not Banks”. Which was very confronting for
us. Fintechs offer an attractive alternative where a great customer experience is the key differentiator. Because
banking should be easy
There are also banks moaning that the playing field is very uneven when it comes to regulation Ever-increasing
regulation is piling on cost and complexity for banks. Whereas for the moment fintechs are being regulated with
a much lighter touch.
All of this forces banks to make an existential choice. Be the Train Tracks or be the Train. Be the Train Tracks and
accept losing all contact with the customer. Become white-label processors, Utilities, Low risk, single-digit ROE
with commoditised products. That is one choice and it’s a legitimate choice because trains need tracks.
But to be successful as the Tracks all focus has to be on delivering operational excellence and super-efficient
processes at the lowest possible cost. Capital will need to be used not for growth but for paying shareholders
higher dividends. Forget about innovation. Forget about having a relationship with customers. Being the Tracks
hands all the power to the aggregators, the comparison engines and the fintechs excelling at the customer1
facing portions of the value-chain. They’re the ones in direct contact with customers. They’re the ones who will
own the customer relationship.
On the other hand banks can choose to become the Train. That means complete focus on delivering a
differentiating customer experience. Because if you want to be the Train then you have to offer a better ride
than someone else’s train. A ride that gets passengers to their destination, as fast as possible, as efficiently as
possible and as comfortable as possible.
We at ING have chosen to become the Train. That is what our Think Forward strategy is all about creating a
differentiating customer experience. Building a trusted primary relationship with customers. Because we believe
that’s where the value lies.
Look at how digitalisation has exploded the number of contacts we now have with customers. We want to use
each of these contacts as an opportunity to empower our customers To provide insight, to provide support, to
help them get a grip on their finances. Because that is how ING achieves its purpose: To empower people to stay
a step ahead in life and in business. Putting people in control of their finances. Doing it in such a way that it will
hopefully turn our customers into fans. Technology and Innovation play a big role in us achieving our purpose.
To succeed. We have to be flexible . We have to be agile. We have to continuously innovative for the benefit of
the customer. Flexibility, Agility, Innovation. These are not words you usually associate with a big bank. The
picture that might come to mind is of a big tanker ship that takes forever to change course
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But this is the picture that I prefer. So we have made “increasing the pace of innovation” a strategic priority. One
of the first appointments I made after becoming CEO was to create the new role of Chief Innovation Officer
With the task of stimulating and speeding up internal innovation
We do that by holding regular “Innovation Bootcamps” where all employees are encouraged to submit ideas for
improving the customer experience. We also host regular Hackathons where our developers work intensively to
produce minimum viable products that can be tested with customers. And we use in-house Accelerators to
develop the best ideas further sometimes partnering internal teams with external innovators. With an Innovation
Fund to bring the best ideas to implementation. We’re also constantly looking at ways to simplify and streamline
the organisation To promote flexibility and agility. The most radical change we’ve made so far is in the
Netherlands where the new organisational structure and way of working is based on digital disruptors like Netflix
and Spotify. With agile multi-disciplinary “Squads” who are end-to-end responsible for a particular customer
value-chain. End-to-end from the product or service design to the delivery. Meaning that we can respond to
opportunities much much faster than in the past.
And most important of all: we’re building a culture that stimulates innovation. A culture where collaboration is
key | where we help each other to be successful. A culture of experimentation. A culture where failure is tolerated
so long as that failure is fast and is used as a learning experience. An innovation-led fail-fast culture is something
that many of you the fintechs, startups and entrepreneurs in the room will take for granted. But it is a radical
change-of-thinking for a bank. Of course there will always remain areas of the bank where we have to have a
zero-tolerance approach to failure
When it comes to building that culture of innovation experimentation and entrepreneurship, ING is lucky because
we have a head-start. We are building on an existing culture one that goes back 140 years to the birth of our
bank. We’ve always pioneered new ways of making banking easier and more accessible. And then there’s ING
Direct the world’s first direct bank. And I also like to think of it as one of the world’s first successful fintechs
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There’s a story I like to tell often so forgive me if you’ve heard it before. In the handover period before I started in
the CEO role. I travelled to Silicon Valley to meet with Google and Apple and several fintech startups and
investors wanting to understand how these innovators were disrupting existing ways of serving customers.
I was invited to a dinner with the CEOs of 5 Fintechs. I was keen to learn from those Californian entrepreneurs
about how they planned to grow a very small business into something with scale something that was
sustainable. But they turned the tables on me! They said “It’s interesting that you ask this, because this is exactly
what we want to hear from you!”. Because they saw ING as a fellow digital disrupter and one of the very few
success stories of a fintech achieving sustainable scale. So I’m guessing that many of you are also interested in
learning about the secret of ING Direct’s success. Particularly how as a challenger as a digital disrupter you can
build scale across borders
I can point to several special ingredients: The first is that we treated ING Direct as a start-up. We kept it agile and
flexible, by keeping it separate from the rest of the bank. With no contact nor influence from the parent, unless it
came directly from the management board. You can see the contrast between ING’s head-office building in
Amsterdam and the ING Direct head-office hidden away out by the airport located there as much to keep costs
low as to facilitate easy travel between Amsterdam and the greenfield countries. A little less glamourous, eh?
We also made sure that there would be no cannibalisation of existing business to avoid conflict with the parent
ING Many of you will know John Hagel from the Centre For The Edge and the Singularity University who talks
about how an organisation’s immune system will kick in to destroy innovations if they are too disruptive to the
daily business of that organisation and that is precisely what we wanted to avoid!
ING Direct was also built around a clear purpose one that focused on the customer and a mindset that “we are
the good guys” challenging the status quo. That purpose was backed up with a customer proposition and service
offering that emphasised simplicity and easiness. And disrupted the status quo not only by offering a completely
Direct banking experience empowering customers to be in the driving seat 24 x 7. But by also introducing No
Fees banking to markets where hidden or unreasonable fees were the norm. Culture was also crucial. Employees
were recruited just as much on cultural fit as on skills. Where innovation and fun were emphasise. And the
organisation was kept flat and built on collaboration and the sharing of best practices. And now to the question
of scaling up. Well, Standardisation was an important factor. For low-cost for efficiency but also because it
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enables collaboration and faster innovation. Each country implementation of ING Direct used the same core
systems and the best practices learned from previous launches. With only the customer-facing touchpoints
tailored for local needs and expectations. But this is also where the power of the parent was put to use. The vast
direct marketing expertise and experience we had built up in the Postbank in the Netherlands. And a big budget
from the parent ING which was prepared to absorb a loss in the early years investing in growth. So if there is a
secret to the success of scaling ING Direct it is the partnership between the smaller agile innovative companywithin-a-company. And the bigger parent with its established brand its capital and marketing and distribution
capabilities
Which is exactly the approach ING is taking towards Fintechs. We are not a venture capital firm. We pursue
partnership. We want to join forces leverage each other’s strengths. We know that we can do the real core
banking, the basic stuff, very well on our own. But when it comes to a differentiating customer experience that
meets or exceeds customer expectations we don’t have all the answers. We want to bring the best ideas from
outside inside. Ideas that can make the difference for our customers. No “gadget-isation”. No gimmicks. But
products and services that empower customers to stay a step ahead be it in life or in business. We have
appointed a Head of Fintech Benoît Legrand who is here today and you may have seen him in a panel discussion
yesterday. I’ve tasked Benoît with keeping on top of latest developments in the fintech world with looking for
opportunities and with managing our fintech relationship and partnerships
We already have more than 40 partnerships in place. The biggest examples being the work we are doing in the
area of Instant Lending with Kabbage in Spain and WeLab in China. We’re most interested in partnership with
innovators and digital disrupters in the areas of: Money Management, Aggregation, Payments and other services
that contribute to the shopping experience, And Customer Onboarding. A simple, clear and easy, online-only,
customer onboarding process is key to offering cross-border digital banking services. So we’re lobbying hard for a
Europe-wide Digital Identity. And I ask for your support in this because it is key to achieving the scale that I know
many of you are trying to crack
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Ladies and Gentlemen. You, the fintechs, the entrepreneurs, the innovators have the smart ideas that can make
a positive difference in empowering our customers. We have the scale, the capital, the customer base, the
marketing and distribution know-how and experience. We can form formidable partnerships. Think David and
Goliathm not as enemies on the battlefield but as best buddies. Or think back to the elephant racing along with
the greyhounds. Together we can transform banking. Together we can ensure that the digital future of banking
is a bright one where the main winner is the customer
Thank you!
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