Speaking on the sidelines of FinovateEurope, Benoit Legrand, the chief innovation officer of ING Group discussed the intricacies of innovation from psychology to the bank’s innovation budget.
As new technologies kindle the start of global fintech, it is imperative that incumbent banks adapt their mindsets and invest heavily, without fear of failure, to take their customers into the unknown, exciting world of innovative new services, said Legrand.
Where is ING investing its innovation arm?
I heard the term bionic bank this morning. The more we digitise things, the more of a human touch we need at a higher level.
There’s a dichotomy between using technology to empower customers while at the same time they want to talk to a human if something goes wrong.
With that digitisation and a human touch providing the emotional connection, you eventually want your customers to love your bank, because without your bank a lot of life’s goals aren’t possible. There’s a real opportunity for banks that have a 10-15 year approach to build that emotional and bionic bank.
To answer your question, we’re investing a lot in money management and payments with Yolt, Fintonic and Payconiq. We partly sold Payconiq to Rabo and KBC bank which we hope to become a new payment scheme for the Benelux.
We’re also going after small business. It’s been a recurring theme for the last five to ten years and it’s been very hard to do but technology is now helping. We invested in Funding Options which we have now deployed as a platform in the Netherlands.
We’re also looking into IoT and invisible technologies piloting with the Dutch railway where you walk into the station and the payment is made automatically from your phone.
What is the ING innovation budget?
We have a yearly incubator budget of €25m. We have a second scale up fund which isn’t public. We have a €300m venture capital fund and we’ve invested €180m already in 27 companies. We are also investing €800m into our Belgian and Dutch IT systems to bring them onto our platforms.
How do you define innovation?
It’s not necessarily about being first, but being relevant. It’s a mindset which should spread around the whole organisation to transform itself into something relevant for the future in a sustainable way.
It’s not a gimmick, it’s not about gadgets or being the first to bring your banking data onto your iWatch - those are details. If you want to be sustainable in the long term, you start with the customer and solve their pain points and problems and put your energy and efforts into those solutions.
It sounds like a cliche but customers are everything. Everyone says this but doing it in a sustainable way over time is a challenge.
This is why we started ING Direct 20 years ago - because the world was changing. We wanted to remain relevant so we offered those value-added services for customers. We’ve accumulated losses of about one billion euros - but we’re building something and creating value that’s relevant for customers.
You need leadership at a very high level to be courageous and go against the tide, against the trends and against whatever your people will say.
As human beings we don’t want change, we want stability. But we have to be able to deliver this change in a consistent way for the customer.
How important is failure in this mindset?
Absolutely essential. This is something we need to learn. We have a culture that affects 50,000 people and it takes time and we have been on this journey for the last 25 years. It’s a relentless effort needed from leadership at the top to say, guys, you failed, that’s okay but please don’t fail five times about the same thing.
It depends on where you are and what kind of risk you’re taking - if you’re in the early development stages you might fail very often. In our labs and accelerators we fail the majority of the time. But eventually we get a company like Yolt.
It’s like panning for gold and important to realise that if all you have are rocks after three days, you need to move on. Despair and disappointment is part of innovation on the journey to finding that one piece of gold.
95% of ING is focused on delivering quarterly year results in order to service customers. But innovation is about trying to take customers to the unknown but we could take 5% of those revenues and build, test, fail and find the gold in parallel. But this is a new setup and culture for banks.
Banks don’t traditionally have research and development divisions - pharma, tech and manufacturing do because it’s part of the business. As banking is moving to technology, this has to become a core capability, which we have, and we call it innovation.
How can challenger fintechs go mainstream?
Nothing has changed in the last 50 to 100 years, if you want to build something successful, it has to be relevant and useful to customers. That takes time and money.
Many fintechs might have had this mindset of pointing to the capability of technology to build a new app or bank in months as a way of competing against incumbents. But those incumbents have customers who will not move because they enjoy the stability. Fintechs need the ability to move from a very good solution to a market leading solution.
Uber has chosen to do it by burning billions of dollars and neglecting regulations but solving them after.
I see a big difference between the big techs and financial services because they are operating in the social world with a limited risk to the customer; you can download the Uber app, it might cost you £7 for a ride but it works. Risk minimal, value high.
Big tech is convenient for consumers, it’s easy to access. On the other hand, it takes effort to leave your bank and there’s no incentive to switch with the perceived value of doing so. Risk high, value minimal.