How ING is innovating its way to the bank of the future

Hi Remco, could you first explain your role at ING and what you like most about it?

“Sure. My name is Remco van der Veer, I’m the head of ING labs. The lab is a setup we created to look at beyond banking and disruptive innovation. So far we have set up our labs in Amsterdam, Singapore and London. That’s my main responsibility area and I report directly to the Chief Innovation Officer. Within this role and within the company we have the ambition to look beyond what we would traditionally do as a bank. So to be able to open up to go beyond banking, while also trying to utilise strong points of the main company, that’s very exciting. Another point I like is that we created a ring- fenced environment, where initiatives have room to grow, get traction, but still are connected to the business with enough freedom to achieve early potential. We’re also not set-up as a showcase or a marketing instrument, but we are really striving for impact.”

How would you describe ING’s approach to innovation and the key objectives behind the innovation efforts?

“The introduction of agile allows us to be more flexible within the organisation, to be able to work in sprints and be more customer centric. We actually brought that to a next level by introducing PACE, where we combine the skills of design thinking, lean start-up and agile, to really be able to validate customer needs and pain points before we develop. I think the strong point is that this is something we’re not doing on an island, but we have implemented it organisation-wide.

ING is of course divided in different business units and we also have the labs environment. So, for the horizon one activities we are set up to innovate following our methodology, PACE, which we introduced in a wider setting with its own governance. So the business takes care of these developments to bring new propositions and service models and extensions of what we already have to the market.

We use the same methodology within the labs, but there we focus more on horizon two and three. That’s going beyond banking, so there it helps to have the freedom to think outside of the existing organisational constraints. But you are of course aware of the context you’re developing in.

So we use the same methodology and we sharpened it a little bit more to stronger business outputs and separate governance. But in the way we implement it and apply the rules that we are using is consistent throughout the company, which also gives it a clear face to the wider organisation about our way of innovating. That’s also why we don’t call it invention, because we really strive to tie it together with business models or in horizon one to direct business or customer benefits.”

How do you ensure to avoid the typical innovators dilemma?

“If you find something that is really disruptive to the core business, then you have to be smart about where you implement it or where you take the first steps. What is key for us is that from the start we always connect the innovations to business sponsorship. So we also always have them informed and working with us and sponsor the initiatives from the start to actually prevent these challenges later on. But it’s always a conscious decision, of course, what you want to progress and what not. A very clear governance and early business sponsorship is key.”

What’s the reason behind the innovation sponsorship at ING? Is it about strengthening the communication between units or about securing further investment in innovation projects?

“It can be both. That’s really depending where you are with the project, on the scenario and what we envision to be the path forward. With the innovations that we do we typically envision a couple of paths. We can position something as a scale-up, where we give the initiative room to grow and flourish on its own. An example of that would be Yolt.

If something is becoming less disruptive and closer to the core business, then we can decide that the initiative is more likely to be integrated into the existing business. We also have several examples of this. Then, the sponsorship is also responsible to securing the landing strip and budget. We do that together. So, the sponsor is always there, because with the PACE methodology we also have stage gates to work together with the governing body on brining the initiative to the next level or deciding on the scaling part.

Another potential path could be a spin out. When we think it’s strategic, but it makes sense to grow with an external partner. One example you may have heard of is Cobase.

We can also say we stop it or we divest it while we allow the teams to pursue an initiative by themselves.

We have a couple of these directions and the sponsor is always involved, while they are bringing it to the next level. It can be that there is a sponsor change at some point, but they are involved depending on which path the initiative takes. That also has obviously consequences on the funding.

Then, to do the innovations, we have set up an innovation fund to allow freedom for the initiatives to actually develop.”

As you have been working with your own innovation methodology (PACE) since several years now, how has it evolved?

“The good thing with PACE is that we co-created it with the business. So, we have the methodology and from the start we looked at what do we see happening out there to create our own innovation methodology and identity that people can relate to. And by working together with the business, that means also picking up concrete cases and approach them in a different way in the PACE methodology. That allowed us to further evolve and sharpen it, to make it very effective.

So one of the things that happened there is that we created what we call PACE everyday, where we also have minimised friction to new introductions and short cycles; then we’re talking about weeks and no longer months.

For instance at the lab environment we have specified it more towards the creation of the initiatives, so much stronger on a different set of business outputs. And we’re now looking how we can bring it to the next stage, also for the main organisation. But it’s also an iterative process, we have the main guideline and we’re sharpening it now based on our learnings.”

You already mentioned using PACE at the core business at ING. How do you drive this change from within?

“You need to sort of kick-start this approach. We did it by setting up a coaching group, helping to actually change the way of working, the methodologies and to help the business units to work with PACE as an agile organisation, but also to be able to do it independently. The different business units were then setting up their own coaching support and their own methodologies from the what we call Centre of Expertise of Innovation, to be able to support the business units with PACE with this new approach. By training more and more people and also by applying the methodology you see that it becomes more and more embedded throughout the organisation. Around six thousand of our colleagues have already been trained, maybe even more. This number is growing continuously by working with the PACE methodology and by applying it in the day-to-day business. These are really strong points. You see these things happening a lot on islands and what I really like within ING is that we’re implementing it on a global scale.”

What’s the current state of digitalisation at ING?

“Overall, it’s very important to us, and we’re trying to reach learnings and experiences throughout different countries and business units to generally bring it up to the next level, because digitalisation is key. It depends of course also on the regional markets, for example in Germany we are only present digitally as a direct bank, while in the Netherlands we have our branch network. So there’s a big variety within ING as well.”

A big part of that is the ecosystem strategy at ING. What’s the rationale behind it?

“The ecosystem is key. We don’t have the illusion that we will be the one-stop-shop for everything for all of our customers in the future. We’re looking at the ecosystem, what desires there are, which roles different parties can play, and also at our own core competence, our right to play within that ecosystem that we feel we can do better than others in the ecosystem or the spaces we’d like to own. So I think the difference in the mentality is that we’re aware of the wider offerings and that we’re continuously trying to find the path to which extent we should go in our offerings to claim a spot there. And we’re in the middle of this journey.”

Who are the future competitors of ING? Is it other mainstream banks, fintechs, big tech companies or other non-FS players?

“It’s an interesting space, on the one hand there are the other banks, who are also operating within a regulated environment, so they have to innovate under the same constraints as we do. Next to that you see the fintechs moving in. They unpack our service offerings and couple it with their own differentiating experiences. So, we have a competitor there, but of course we also try to partner with them and to work together. But then from another angle the big tech companies are moving into the space and they are trying to get access to the interesting profitable angles. So there we have to balance what we do in the hardcore banking activities that we, as a regulated bank, can do, and to what extend we can keep expanding on it. So the fintech companies and bigger tech companies certainly provide new angles and also new budgets on certain innovations and market coverage that we need to adjust. One example is Apple Pay, which we introduced as well.”

Is digitalisation the ultimate differentiating factor in banking?

“Digitalisation per se is not the differentiator, but what it enables you to do. If it simplifies the user journey or allows you to get more needs covered in a different way, then you have strong advantages. Look at the new entrants, let’s say the young adults, they only use mobile and they expect that information and cards can be dealt with and changed via mobile, so if you’re not digitised, then you’re missing out on future generations. I think if you combine it with addressing the needs and changing needs of our customers and provide a differentiating experience, then for sure it’s a strong point. And it’s also what we’re trying to do.”

Given the changing customer needs and the new entrants coming into the banking segment, what will be a winning strategic positioning for the banks?

“I think my personal preference would be to have a role as a main platform player with a core differentiator towards the other parties. So that there’s a part in the ecosystem that we can claim and that we can do very well. If you ask me, I think that makes sense. ING has the people, the ambition and the potential to do this. But I also understand that other banks say that it could be a niche or that they’re re-focusing their core activities on things they can do very well.”

We think that is a great ending statement and we will for sure watch what’s coming next from ING. We’d like to thank Remco van der Veer for taking the time to discuss the future of banking with us. You can follow ING labs or get in touch if you want to develop a venture or partner with ING Labs on the following site.