For instance, the bank developed its successful originate-to-manage (OTM) mortgage or buy-to-let proposition mostly in-house. Regarding investing activities, Duncan mentioned that NIBC takes equity stakes in fintech companies. Examples would be Finleap, OakNorth, iwoca or Beequip. He also asserted that they’re currently looking into establishing partnerships with fintechs as well: “We prefer to work with other companies. We don’t think that we can reinvent the wheel ourselves and there are many fintechs which can help us out, also with putting new propositions in the markets, and we’re fully open to that”.
When asked about how to ensure productive cooperation’s with fintechs, he mentioned Beequip as a best case example: “They started actually in this environment and worked across our office for about a year, now in Rotterdam. They’re mostly independent, and that works perfect”.
As many banks actually struggle to develop effective innovation capabilities that generate sustainable new revenue sources, we wanted to know if any of the new propositions generated a return on investment for NIBC. Duncan mentioned the new OTM mortgage mandate as an example, which increased to €3.5 billion in 2018 with a drawn portfolio at €2.4 billion, leading to €11 million OTM related fee income in 2018, an increase of 175%.
Duncan also mentioned that online channels are not a key focus for him personally right now:
“Related to the bank’s business, the corporate side is largely driven by direct relationships and advisory. On the retail side, we offer mortgage loans, where a lot of developments are happening in the market. We are digitizing the product, but so far we provide the loans through intermediaries. In my view, digitizing products doesn’t generate ROI or client satisfaction per se. You also need to digitize knowledge to keep the relation with clients strong”.
Beyond that, NIBCs savings portal is already fully run as an online-only proposition: “The retail business at NIBC is very efficient. Within retail banking we have small portion of the bank’s workforce, with a book of €10 billion, which is quite efficient and we’re able to scale it even further. Although obviously interesting, there are several ways to serve your clients and be successful”.
Differentiating a bank in the digital world
For the last part of the interview we covered a topic that is often overlooked when analysing innovation in banking: internal innovation culture and the concept of brand permission. As many financial services are transferred to the digital world and clients get more transparency about the best offers, how do banks ensure brand loyalty and client retention?
Concerning internal awareness about the bank’s future, according to Duncan, there are always discussions about the next steps: “If you don’t know the current opportunities, you cannot start a discussion about the next phase. So, you need to start discussions and show what’s possible nowadays. Also things like sandboxes, pilots, using Python or working with fintechs in general, few thought that was possible about four years ago. Now it’s totally normal”.
For smaller lenders like NIBC, the key differentiator is the excellent service quality and expertise that NIBC offers in its niche segments: “Our strength at the moment is that we offer tailor-made solutions to corporate clients, which makes is more difficult to achieve efficiency gains compared to the payment, SME and consumer lending businesses.”.
Even though the threat of fintechs and big tech companies to banks are often discussed in the press, Duncan beliefs that in the long-term, the key competition will still be from other banking institutions who cooperate tightly with fintech players:
“I think it will be mainly the banks, but in cooperation with the best fintechs and other third parties for their clients. So for all banks there is an urgency to to cooperate and experiment with fintechs in order to become the winners of the future”.
We’d like to thank Duncan De Vries for taking the time to discuss the future of banking with us. If you’re a fintech that is active in one of the NIBC focus areas and seek a cooperation with an experienced bank, make sure to contact Duncan.
Header image credit: Frank Poppelaars.