It sounds obvious – focussing on customers
Banking is changing at a faster pace than ever. Benoît Legrand, ING’s chief innovation officer, explains how banks must put customers’ needs first as they endeavour to apply their heritage and values to today’s digital world.
In both the retail and wholesale markets, ING has a long reputation for putting customers at the heart of its business. We’ve been known for building relationships and giving genuine consideration to our customers’ needs.
Long before it became trendy in the rest of the banking industry, we operated an explicitly customer-centric model. Put simply, that means we are willing to go the extra mile to make sure that customers are satisfied and to ensure that we way we offer our products and services is instant, seamless, personal and relevant.
It’s very easy to talk about customer centricity. ING has always ensured that it means something concrete in terms of our strategy: net promoter score (NPS) has been a key metric for the bank for many years.
ING was perhaps the first bank to translate customer centricity into a new technological model with the launch of ING Direct. Our successful disruption of the banking sector, with a model that used phone and online, showed that we could apply our heritage and DNA to a new environment.
ING is still consistently ranked number one or number two by NPS score in most of its retail markets (currently number one in nine out of 13 countries). Customers seem to prefer banking with us than other banks and accept the idea that a relationship can be sustained and deepened via new banking channels.
The idea of meeting customers’ needs through new technologies closely aligns with today’s broader societal trends such as empowerment through digitisation. It is our duty to give customers the tools and information they need to manage their financial futures: that goal informs our approach to innovation.
Nobody wants to queue in a branch to transfer money. Being able to move funds in seconds using a phone, whenever you want, is empowering. Digitisation therefore provides us with new ways to serve customers.
Another way that new technology can empower customers is by providing insights that enable them to better manage their money.
Yolt, our free mobile app, helps people to keep track of their finances by analysing their financial behaviour. Payday, when your salary is booked, is crucial to Yolt’s concept. For example, if you spend €2,500 a month and you’ve already spent €2,300 with five days to go before payday, it will make you aware of it. Or if your savings are earning 0.5% in one account but 0.7% is available in another account you hold, Yolt can help you make a smart financial decision.
New entrants to the financial services sector have undoubtedly shaken up the industry. In particular, their focus on the front end has improved interaction with customers. However, innovation is not only coming from new entrants.
There is fundamental change underway – much of it driven by established banks such as ING. Technologies such as blockchain have the potential to change how the entire industry works, by providing a safe way to share information that is faster and more effective than existing models.
In transaction banking, we are part of the R3 consortium that is developing Corda, a distributed ledger platform designed for businesses: recently we tested blockchain technology in trade finance and also led the first live securities trade on a blockchain platform. In a separate initiative, we are taking the lead in using blockchain-based technology in trade commodity finance, where ING is the largest financer worldwide.
The greater attention being paid to data will also have enormous implications for the banking sector. Historically, banks saw value in terms of interest margins and fees – the fundamental model was to create value by transforming short-term liabilities into long-term assets.
It has become commonplace to describe data as the ‘new gold’ but for banks it is no exaggeration – data opens a window to new business models.
Our Yolt app does not sell ING products but instead provides a platform (based on data analysis) where customers interact with third parties, creating value for them, the third parties and ING.
In financial markets, we have developed a new tool called Katana, which is based on historic and real-time data. It helps bond traders make faster and sharper pricing decisions when buying and selling bonds for their clients. Initial testing shows that traders can offer the best price four times more frequently than in the past; pricing decisions are faster for 90% of trades; and trading costs are 25% lower.
Digitisation and humans can coexist
The Big Data revolution is also creating more effective ways of providing traditional banking services such as lending. Risk is a function of knowledge: the more you know about someone or something, the greater your willingness to lend will be, for example.
Our knowledge is no longer static but constantly updated. For example, ING works with US fintech Kabbage in Spain, France and Italy to automate lending to small and medium enterprises. Information such as payment flows is sourced from a wide range of banks, enabling the rapid construction of an accurate risk profile.
In this instance, digitisation removes the administrative burdens associated with lending and means that fast growing companies get access to the funds they need more quickly. A loan of up to €100,000 can be approved (or disapproved) in just a few minutes. The money will be in the customer’s account within 24 hours.
This example shows that in some circumstances contemporary banking involves less human contact that in the past. Self-service tools that enable users to complete straightforward, time-dependent tasks are valuable because they save time.
However, that does not mean that human interaction has no role – just that context is critical. If you want a mortgage, you don’t want a robot explaining in an impersonalised way how to get it. You want personalised assistance that responds to your situation: this can often be most effectively delivered by human interaction. Similarly, in wholesale banking some tasks, such as whether to list your company, will always require a personal touch.
Even where a relationship has been originated through digital means, such as lending using Kabbage’s data, a foundation is created for human interaction and a possible future relationship with that customer. Some call this bionic banking – interaction from employees is enhanced by the power of technology.
Moreover, technology can be used to facilitate trust between us and our customers. Our blockchain team have overcome one of the biggest obstacles to using blockchain in financial services: protecting data privacy. They have developed a new code, known as a zero-knowledge range proof, which is 10 times more efficient than existing technologies at keeping information on a ledger private. As a result, it will enhance users’ confidence in ING.
Making banking simpler
New technology and channels are transforming banking. However, human relationships, especially in wholesale banking, will continue to be the bedrock on which banking services are built. Similarly, in-depth sector and regional knowledge remain important assets for building, and strengthening, the bond between ING and clients.
The challenge for all banks is to join digitisation and human interaction in a seamless way that reflects their heritage and values and reinforces the relationship that they have with their customers.
If banks get it right – which ING is endeavouring to do – then banking relationships will become simpler and more satisfying for both retail and wholesale customers. Our customers will be able to spend less time on non-creative, standard administrative tasks and technology will provide better insights that enable them to make smarter financial decisions quicker. And we will have more time to explore the customer’s needs so that we can proactively help them to achieve their goals.
Also watch this short interview (02:19) of CNBC with Benoît Legrand on 13 March 2018.