ING is betting its future on open banking and a business model that makes it more of an intermediary in the financial services marketplace.
The Dutch company sees its new role as not necessarily providing financial services directly to customers, though it continues to do that, but creating platforms on which it matches consumers to financial products and providers that are right for them.
In Europe, of course, open banking is much further along than it is in the U.S. because European regulators have mandated it. But the wave of open banking is coming to the U.S., and in a few years American banks will likely be forming strategies similar to ING’s.
Fintech roots
Amsterdam-based ING has 38 million customers and 54,000 employees in more than 40 countries.
Twenty years ago, the bank started ING Direct in the U.S., which according to Benoit LeGrand, the bank’s chief innovation officer, was one of the first fintechs. (The other was PayPal.)
Under ING’s new open banking drive, it has scored an early win in the U.K. Even though ING has no retail presence in the country (it does have a wholesale bank there), it is handling 65% of open banking activity in the country. Open banking volumes are the exchange of data transferred between banks through open banking, which are monitored by the Open Banking Authority.
How? The bank created a personal financial management product called Yolt that pulls in account data from other banks and fintechs that operate in Great Britain to give consumers a view of their entire financial picture. It categorizes and monitors spending, lets people set and monitor savings goals, and offers person-to-person payments. The app provides advice, such as giving people a heads-up that their paycheck won't arrive for three weeks and that they have several bills coming up in the meantime.
ING built Yolt on the back of open banking and PSD2 regulations in Europe two years ago. It now has close to 1 million customers. LeGrand calls it “an open banking disruptor.”
The point of open banking in Europe is to increase competition in financial services by making it easier for consumers to move accounts from one bank to another, but there has not been a lot of account-switching at Yolt. However, customers have moved funds between accounts at different institutions. LeGrand calls this “switching accounts 2.0."
“When I was the CEO of ING in France, more than 75% of customers would not recommend their bank, but only 4% would switch banks, because switching is such a hassle,” he said. “There could be a lapse in which you might have difficulty paying your invoices. Here, you don’t have to switch banks, but you can use your bank accounts in an effective way. You can move your current account transactions to another bank. You can transfer savings by clicking on a button ... when you see that your savings rates are different.”
ING’s goal for Yolt is to attract as many customers as possible.
“We believe that only a few players will survive in a world where the winner takes it all, so you have to be amongst the first and get critical mass as fast as possible to outplay the competition,” LeGrand said. “The bigger you are, the better you are at attracting partners.”
ING gets referral fees from its partners. He declined to say how much it charges.
So far, ING has partners in pensions, insurance, and power companies that offer deals on Yolt.
ING uses the information it has about Yolt customers to match them to the most appropriate partners for them.
“Our expertise would be, knowing that you pay too much for electricity, to bring to you three or four suppliers of electricity who charge less,” LeGrand said. In the U.K., power companies compete for business.
If it sounds like ING is straying far from the normal business of a bank, LeGrand says it is a return to the original service banks provided.
“There’s a real sustainable business model to be the companion of the consumer,” he said. “We’re not selling product, just making sure you are effectively managing your money.”
ING has launched Yolt-like apps in France and Italy, where it has retail operations and therefore will be disrupting itself.
In a more dramatic example of how ING is changing and, you might say, disrupting itself, it funds competitors in some markets.
LeGrand's group has a $300 million fintech venture capital arm called ING Ventures.
One of the fintech startups it has invested in is Fintonic, which has an app similar to Yolt in Spain and Latin America. Fintonic and ING compete directly in Spain.
“I don’t know what the future will look like, so we're trying to build as many optionalities as we can,” LeGrand said.
LeGrand's unit also has ING Labs in Singapore, Amsterdam and London. Then there is a fintech team that scouts out fintechs and tries to build partnerships with them. The bank has 170 partnerships so far.
One of those partners is Ascent in Chicago, which keeps ING informed of all the regulations it needs to follow.
“This is saving enormous time and getting us in control of what needs to happen,” LeGrand said.
Getting staff on board
Not everyone who works at ING wants to disrupt the bank, LeGrand acknowledged.
"Like everywhere, there is a lot of not-invented-here syndrome — not under my control or this innovation will disrupt me,” LeGrand said.
Support from ING CEO Ralph Hamers has been essential, he said.
The innovation group also has incentives to keep leaders of ING business units happy. A key performance tool is an internal stakeholder survey in which senior leaders are asked if the innovation group helped them to be successful. LeGrand and his team are also measured by impacts on the bottom line, efficiency and risk management.
“I have a dashboard that combines all those elements,” he said. “So for us, success is delivering concrete value through new users, revenues and aiming at an impact on the bottom line of the bank. You cannot do this when you start innovation. You first need to get things moving, then you need to have a lot of things happening, then you can focus and sharpen money and people on things that matter.”
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