ING: Scaling Products by bench-marking against big tech companies
A peek into how this Netherlands based global banking giant executes its innovation strategy.
Key Takeaways
ING has a variety of ways of turning great ideas into products and services that customers need. These include in-house innovations using the bank’s €25 million Innovation Fund, investing in and partnering with fintech companies via ING Ventures, as well as developing their unique innovation method, PACE.
It took home four awards at Global Finance magazine’s Innovators 2020 including the Most Innovative Bank in Western Europe. The bank also won awards for homegrown innovations in Cash Management, Corporate Finance, and Payments.
An ING spinout, Cobase raised €10 million in its first external funding round. The fintech’s multi-banking platform allows big corporates to view all their balances and transactions in one place, initiate payments, and perform actions related to cash management or corporate treasury.
ING is a Netherlands based bank with a global footprint. In a recent event organized by CBInsights, Annerie Vreugdenhil, Head of the firm’s wholesale banking innovation team outlined their approach to new product launches and why measuring success against the big-techs than traditional banking competitors spurred a culture of innovation at scale and speed within an organization firmly rooted in the traditional banking space.
The moment of epiphany came for Anne when she heard about a small taxi service company in a village smaller than the size of Spencer, Iowa in the company’s own backyard, in Netherlands.
The taxi service company was accepting payments through a QR code provided by Ant Financial, the Chinese fintech giant backed by Alibaba. The realization scared Anne and made her envision a future when her own clients would demand similar services.
So, she started working on innovating across lending, payments and other traditional banking services offered by the wholesale division.
Cobase: The first big innovation breakthrough
Cobase, a spin off company created by ING helps corporate clients with multiple tokens and different bank accounts aggregate all of its banking products on a common platform to build a consolidated view of the liquidity position within a company. It can also be used to make and settle payments. Cobase was featured in the CBInsights global top 250 fintechs in 2018.
Anne shared an anecdote of her initial interaction with analysts at CBInsights who invited her on behalf of the firm to speak on ING’s innovation and benchmarking agaist big-tech. She said, “we are now on average having our initiatives to scaling which is a working product with a paying customer in 15 to 18 months but this is way too slow. We have to go much faster and the response was what do you mean way too slow most banks we speak to they are still in PowerPoint face after 12 months.”
Anne realized she actually doesn’t consider traditional banks as her competitor but large technology companies like Amazon, Google and Alibaba as the challengers.
Big-techs are entering payments, lending and traditional banking territories at scale with the power of computing and tech know-how. Amazon is beginning to lend to its merchants and Google, Apple and others are also offering products in the payments space to consumers and companies. The impact for banks is huge. In ING’s case, they’ve witnessed a double-digit depletion in the payments business market share since the arrival of big-techs in this territory.
Setting the ground rules for innovation at ING
Anne said, “The readiness and availability of data increasing over the years is going to change a lot. We want to make our contribution and help our clients with that transformation to ensure that we are, as a bank, are still an important, innovative, and relevant player in the future”.
Insight: First define what innovation is not about. Innovation is not about gadgets or new technology, rather it is about creating a different set of customer experiences as customer demands evolve.
ING follows a three-pillar innovation strategy, the bank’s in-house €25 million Innovation Fund, investing and partnering with fintech companies, and developing their innovation method, PACE.
It has setup PACE Labs in Amsterdam, Brussels, London, and Singapore topartner and bring disruptive ideas to the market by combining their knowledge and network with their partner’s knowledge and skills.
They explore ideas and opportunities beyond traditional banking and are not afraid to scale-up their most successful projects. PACE is an iterative process that brings together design thinking, lean start-up, and agile scrum methodologies in a five-phase process: Discover. Problem Fit. Solution Fit. Market Fit. Scaling.
Insight: Partnerships and collaboration is a reliable strategy to bring in new talent, technologies and ideas to solve traditional business problems. Look for ways to establish an internal accelerator and define what success means for you in the ever evolving landscape.
Big-tech: Innovation and disruptive brute force at scale
ING realizes the need to establish strong internal systems to compete withthe big tech. This means getting into the core of the product as soon as they can and to get user flows.
Big tech companies are moving into the banking space and are trying to get access into interesting profitable areas of the industry. Therefore, ING intends to balance what they do in hardcore banking activities and keep expanding into new innovative zones.
The path to the blue ocean of innovation goes through a treacherous terrain
Building a process of innovation in an organized setup has its own set of challenges.. A big one is developing these projects alongside the current business. This means building new businesses adjacent to the core banking business and sometimes outside to prevent any slowdown. Recruitment and team building is again a major challenge thwarting innovation efforts within an established hierarchy.
Insight: It is extremely important to have the right mix of people with the right project/problem, understand early on if the project is a money pit or an investment, and make decisions accordingly.
Conclusion
ING’s strategy towards innovation allows them to be completely/partially invested in or fully take up projects that are strategic to their role as a wholesale bank and are related to industries or spaces that they know well. Their ultimate aim is to come up with the best solution for their clients by always staying ahead of their competitors.