Can a large bank ever have the same thirst for innovation as a fintech start-up? The answer is yes. ING has run ahead of the crowd in digital banking for years, thanks to a targeted approach based around several key areas. Lieven Haesaert, Global lead innovation management and transformation, explains.
Agile, squads, tribes… These buzzwords don’t normally bring to mind a big bank. However, this kind of jargon has been the most normal thing in the world at ING for years. Within the international banking world ING is one of the frontrunners in digital, while it started implementing an agile way of working back in 2015. Former chief exec Ralph Hamers has said before that his organisation is more like an IT company with a banking licence: a real fintech with digital innovation in its DNA.
The bank owes this halo largely to the huge success of ING Direct. It was 23 years ago that this ING subsidiary – working with as much online communication as possible and no office network – managed to win over new markets to its savings products and mortgages. It was given the freedom to pioneer by management with great success. At its peak, ING Direct had 24 million customers in nine countries and €260 billion on its balance sheet. Parts of ING Direct were sold after the 2008 crisis, but its culture of creativity and innovation has remained.
In 2009, when the financial crisis was at its peak, you left a directorship at eBay Europe for ING. Why?
Lieven Haesaert [laughing]: ‘My colleagues asked me the same question at the time! Why did I go to a bank instead of an American big tech? Then I told them about ING Direct and the penny dropped. When I started at ING as head of online channels for ING Belgium, I didn’t have to act as a missionary to explain digitalisation to the company internally any more. I switched because I saw the opportunities for a bank that constantly wants to challenge conventional thinking.’ You have been Global lead innovation management and transformation for a year. Tell us about this role. ‘I am part of ING's Chief Innovation Office. We orchestrate all innovations within the bank, lead the more disruptive innovations in our “labs” in Amsterdam, Brussels, Singapore and London, and the scale-ups and ventures we invest in. ING currently has more than 200 partnerships with fintechs, 30 investments via ING Ventures and 30 innovation initiatives in development. One of my roles is to determine which innovation initiatives get the highest strategic priority, for example, through an innovation fund which provides money to our labs. In addition, I am responsible for driving transformation and innovation throughout the organisation.'
Lieven Haesaert (1972) started his career at KBC Bank, moved to The Boston Consulting Group and then went on to work with eBay. He joined ING in 2009. After several positions in the bank’s digital operations, last year Haesaert became Global lead for innovation transformation and management.
Is it possible to control all innovations centrally if you are an “agile” bank?
‘Of course not. This is why all incremental, non-disruptive innovations which aim to improve the customer experience (but don’t change our business model) are as decentralised as possible. Wherever possible, the responsibility lies where the customer relation-ship is managed. We want to stimulate rather than hinder local initiatives. Empowering our employees is very important to us.'
In 2015, ING started using the so-called Spotify model of an organisation divided into tribes and then self-managing squads. How is that going?
'Very well. Before we started this, I had to sign piles of paper as the person ultimately responsible for ING’s digital channels. This kind of bureaucracy demotivates people and inhibits innovation. With agile working, local squads can validate the requirements for innovations themselves, which speeds things up. The next question is: how do we develop innovations that the customer really needs? With this in mind, in 2016 we introduced “PACE”, a structured innovation methodology that combines the best of Design Thinking, Lean Start-up & Agile Scrum principles in a structured way. It means that new concepts are quickly tested with the customer, with the motto: “learn fast, fail fast”. This should ensure that a product or service solves a customer's problem and is something the customer really wants.’
‘In countries where we have introduced a mobile-first proposition, such as Turkey and Australia, we have seen a
significant increase in both customer satisfaction and sales’
What is the essence of the ‘PACE’ method?
‘Learn what works and what doesn't, quickly. Instead of a fully developed product idea, you start with a “minimum viable product”. You test this concept directly with customers and their feedback decides how you develop it further. For ING, PACE in combination with agile working is the best way to stay ahead in an ever-changing financial world, with fintechs and other competitors.’
How does your role ensure that the organisation looks beyond quick wins, such as new apps or services?
‘I make a distinction between three time periods of thinking and doing. The first “horizon” is about quick wins for the short term, like innovations that make it easier for customers to find their way to our digital channels. This horizon doesn’t involve making structural changes, but you might make gains from exchanging best practices between different country units or product teams. The second horizon is more radical. It’s about transformations that adapt your existing business model to new customer behaviour. This might be, for example, an app to run an entire mortgage application via your mobile without having to go to a branch, or a chat function for customers who have questions about their investments after office hours. In countries where we have introduced this mobile-first proposition, such as Turkey and Australia, we have seen a significant increase in both customer satisfaction and sales. Internally, some colleagues were sceptical at first. Would customers really want to do all their banking on a mobile phone? The growth figures prove that this is indeed the case.’
‘With many financial products you can barely stand out from the competition as a bank,
but with the customer experience and services around it, you can’
And the third ‘horizon’?
‘This is about exploring the unknown. It concerns the really disruptive innovations that could change the market. We want to manage these centrally because you are daring to challenge your own business. We are in essence talking about innovations that offer a significantly better customer experience at a lower cost. With many financial products you barely stand out from the competition as a bank, but with the customer experience and services around it, you can.’
Can you give an example of this kind of disruptive innovation?
‘In the UK in 2017, we started Yolt in the wake of PSD2, the new European directive for payments by consumers and businesses. This meant the customer can decide to share personal payment details with other companies. Yolt leverages on the possibility and helps customer to make better financial decisions. The app gives a complete overview of a customer’s financial situation including income, expenses and breakdowns of spending patterns. In addition, Yolt facilitates other service offers such as energy or pensions, without being the producer itself.
So, it acts as a platform?
‘Exactly. Yolt has been a great success and has 1.3 million registered users so far. We started in England and have now also launched it in France and Italy. The platform economy is booming, if you think about success stories such as Amazon, Airbnb, Booking.com, Alibaba and WeChat. As the owner, or rather the ’orchestrator’ of this kind of platform business model, you ensure that supply and demand can meet. We have seen that this model can be very relevant for financial services. In Spain, for example, ING Ventures has a stake in Fintonic, a Yolt-like app created by a Spanish fintech. Fintonic is a platform for consumer loans and insurance. Customers get a superior experience which means they can receive a loan at the lowest cost online within five minutes.’
But what if an ING customer ends up with a loan or mortgage from a banking competitor via this platform?
‘We may indeed offer the customer another bank’s product if that product better suits the customer's needs or if we cannot offer a suitable solution. It's about the customer’s best interest, and it is also increasingly common for us to work with other banks and companies. For example, in Belgium we have launched the identity platform “itsme” with a number of fellow banks and telecom companies. This allows a customer to adopt a digital identity that replaces the card reader or bank card passwords as well as his identity card. Platforms are meeting genuine customer needs. This is why ING is committed to them, for example, with independent platforms such as Yolt, by connecting with existing platforms and of course by becoming a platform ourselves.’
The benefits of digital transformation are obvious to ING. Can you see any disadvantages?
‘Mmm, not really. Surely it can never be a disadvantage to look forward to the future? Nowadays, standing still is not an option.’