Ecosystems: the future for banks?

Working with partners is critical but customers’ needs must drive banks’ changes, says ING’s chief innovation officer Ignacio Vilar.

Within the banking industry, ‘ecosystems’ are the buzzword of the moment. Many observers believe the idea that banks will work more closely with other parties, including from outside the world of finance, is inevitable: we agree and call this development ‘open banking’. However, while ecosystems may be an important part of the sector’s evolution, it is customers that must be key. Put simply, all future plans should be driven by customer expectations and their needs in terms of use, information and accessibility.

The way people communicate, shop and do business is clearly changing at an unprecedented pace; banks must respond to this transformation. ING seeks to empower people to stay a step ahead in life and in business. To help customers achieve these goals, we need to become the go-to platform for their financial needs – and beyond. This will only be possible if we reinvent our relationship with customers and make our services as accessible as possible using all available technological means and, if necessary, overturning decades of banking practice.

A new way of thinking

Crucially, we realise that we can’t do everything ourselves if we are to meet the needs of retail and wholesale banking customers. Instead, we must connect with others. One way to do this is to aggregate a wide range of products and services so that customers gain insights that help them make informed decisions. Through aggregation, our interaction with customers becomes broader and richer and extends beyond banking: we want to help customers on their entire journey, including outside the narrow confines of what currently constitutes banking.

What does this mean in practice? In the UK, ING re-entered the retail banking market earlier this year with a free mobile app to help people keep track of their finances. The app, called Yolt, enables users to manage their money matters with different banks for different financial services in one place. As importantly, by understanding more about customers’ behaviour, ING is able to add value for them and create opportunities for partners. For example, Yolt gives its users the ability to monitor spending on utility bills and connects them with cheaper suppliers in order to save money on energy.

Another example is in the mortgage market. Customers traditionally come to ING for a mortgage, but their true need is to buy a house. ING can simply lend to them and have an important limited relationship with them. Or it can try to cover their full needs throughout the buying process by putting them in touch with a notary or other services that they will need. In the Netherlands and Poland, ING is already experimenting with these ideas by connecting customers with third parties.

In the wholesale banking world, it may seem more difficult to envisage opening up to third parties because of the close links between different banking services such as cash management, trade finance and lending. However, as in retail banking the objective is to become the go-to platform for customers’ financial needs and beyond. For example, ING has partnered with Axyon AI to acquire expertise in deep learning and bring it to the loan market. Together we are enabling FI clients to become more data-driven in structuring and arranging loans that involve multiple lenders. Technology is being used as an enabler to extend the customer relationship and more effectively fulfil their requirements. In this sense, there is a clear move from a world of silos to an ecosystem approach.

Not a zero-sum game

Every time an ecosystem is opened, the value chain changes as the opportunity arises for new players to enter. From a customer perspective these additional providers can be beneficial: in many ecosystems there is waste, and new players are often well placed to eliminate it.

Among some banks, there is a justifiable fear that opening up an ecosystem reduces their potential rewards by increasing competition. However, the reality is that it makes the pie larger, giving everyone the opportunity to grow. This is driven by the network effects that a healthy ecosystem creates, among other factors.

Those banks that have strong relationships and an attractive platform that enables them to add value for customers and service providers will benefit. If ING is able to be the platform for customers by deep diving on our knowledge of customers and their needs, then opening the ecosystem will create more opportunities than challenges for the bank, as well as for customers and partners.

Excelling on engagement

In the retail market, ING has 36 million customer relationships – we interact with these people 3 billion times a year: we already have the relationships and the traffic to make an ecosystem approach work. We’ve been able to do this by evolving how we engage with customers – moving from branches to call centres to mobile banking, which now represents 50% of activity.

Our aim is to ensure that customers keep connecting with ING by excelling on engagement, quality of service and our ability to transform information into useful services that deliver benefits to customers. We must continue to remain relevant and be where our customers are. While ING will maintain a core of services, we need to constantly reinvent how we do banking, by providing a fuller range of self-service options that reflect customers’ desire to manage their own needs, for example.

This reinvention must be informed by an understanding that in order to retain customer relationships we need to evolve from meeting purely transactional needs to meeting emotional needs. In practice this means using knowledge to provide useful insights and to support customers with the various events and challenges they encounter through their life journey, whether it be buying a new car or going on holiday.

Meeting emotional needs sounds like a tall order for a bank. But at ING our brand perception is already different to many other banks. While we can’t claim to be ‘loved’, there is a strong connection between us and our customers. In most of our retail countries, we are number one in net promoter score, an index that measures the willingness of customers to recommend a company to others: existing customers are a major source of growth.

We have achieved this connection with customers by being relentlessly customer-centric: it’s in the DNA of the bank. While such a claim is easy to make, it is difficult to achieve. Customer centricity must be there in every decision the bank makes and how it talks to its customers. From installing the first ATM to creating the first digital channel and revolutionising retail banking with ING Direct, we’ve always aimed to make banking simple and accessible – customers give us credit for this approach – but we must continue to innovate and excel in order to retain this trust.

Driving innovation

Within any organisation, culture makes a huge impact: at ING it is one of the three Cs – the others being customers and connections – that drive the business. Our aim is to create a culture where our more than 50,000 employees are obsessed with creating a differentiating customer experience.

To ensure this is achievable, we have created a Chief Innovation Office to drive change. We have also implemented new ways of working so that all new products and services respond to a specific customer problem: we are not interested in making clever gadgets for the sake of it. And in the Netherlands, we have moved to an agile structure with the specific goal of breaking down silos within the bank to better serve customers and develop innovative products and services quicker.

“In each case, we are seeking a win for customers, a win for ING and a win for our partners.”

But our culture is also about bringing the outside in. Before we begin any project, as well as asking what specific practical customer problem it solves, we ask whether we should build it ourselves. Where a service is not core to the bank, others may be better placed to build it. Having started almost a year ago, we now have almost 100 partnerships with fintechs. These vary widely in character. Some are service level agreements while others involve equity stakes. In each case, we are seeking a win for customers, a win for ING and a win for our partners.

ING’s emphasis on the use of accelerators that involve third parties to create new products and solutions is already having a big impact. From a practical perspective, it’s an efficient way to develop new technology. Our structure also helps with this: we have a presence in more than 40 countries, with a full banking service (including retail) in 13 countries, so we are able to conduct trials in one country before rolling out elsewhere. While local nuances still exist, customer expectations are becoming more universal around the world. As a result, it is easier to use ideas from one place and implement them everywhere.

Creating a framework for cooperation

Within financial services, it often looks like there is a stark choice to be made between cooperation and competition. The reality is that both coexist – and feed off each other. Much of today’s innovation is taking place as a result of partnerships between banks and fintechs; ING is no exception. But that should not exclude the possibility of working closely with other banks to add value for customers.

The example of the Payconiq app, which enables users to make direct mobile payments, in-store and peer-to-peer, demonstrates this point. Payconiq began as a fintech within ING seeking to make payments easier for customers and retailers, but we rapidly realised that this mission was only achievable with critical mass. To ensure a strong value proposition for everyone involved, ING partnered with other banks and subsequently shared ownership with them. While Payconiq partly disrupts our existing payments business, it also shows we proactively deal with changes affecting our markets. Our actions demonstrate our determination to make a real impact for customers in this area by spurring evolution in the industry.

Although wholesale banking operates in a different way, the trends in terms of innovation and cooperation are similar to retail banking. For example, blockchain-based technology created by last year’s ING fintech bootcamp winner Easy TradING Connect has already been used to complete oil trades (liquefied natural gas trades are expected shortly). Blockchain is being used to simplify a market that is currently complex, with multiple parties, including other banks, and myriad processes. ING is enhancing the value in the existing trading value chain, making it more attractive for customers, ING and third parties: a win-win-win outcome.

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The View is the online magazine of ING Wholesale Banking