Leading with mobile: In conversation with ING’s Petri Nikkilä

Back in 2017, the McKinsey courtly interviewed two executives from ING. That interview focused on the then two-year-old Agile transformation journey that the bank had embarked upon in 2015. It struck a chord with banks and financial services providers all over the world and was one of the most rare articles on all McKinsey platforms for several years. Today, five years later, we're back at IMG Amsterdam to discuss the banks' continuing transformation and also reflecting on quite what an intervening five years this has been. Tragedy, disruption, turbulence and innovation. Some of the most appropriate words that spring to mind. Today, we're going to focus in specifically on the retail bank, ING Netherlands, and its digital evolution based on a mobile led strategy. And to do this, I'm very happy to be joined by Petrie Nikola, ING's head of retail banking. Petrie joined ING from the Nordea Group, where he was chief commercial and digital officer and prior to that, spent a career of more than 15 years in consumer goods and financial services with Union Leaver, Mars and HSBC. I'm also delighted to welcome my colleague, Marcus Siebra. Marcus has been with McKinsey since 1995 and today as a senior part of the firm, Sirs Banks and private equity firms across a range of topics, including comprehensive transformation strategies. Welcome to you both. Marcus, I'm going to start with you if that's okay. It feels like the word innovation is synonymous with banking. It never stops. I wonder if you could start us off, perhaps, by painting a picture of where European retail banks stand today on their digital transformation, where are most on their journey? What's McKinsey seeing? What we see is that we are currently for retail banks in a pretty difficult situation. When you look at the average during the pandemic, the use of the branch went down quite dramatically and digital sales could not fill the gap. Just Finalta, our benchmarking firm, showed us a quite stunning number of -14% of sales in 2021. And that goes for across all core products. So we're talking about current account savings accounts, cards, etc. So why is that happening? Is that happening because customers are not interested in buying more or getting better services digitally? No. Customers are super willing, have never been more willing. You see this mega trend happening in the direction of more digital interaction, engagement, and ultimately also buying that happened over the pandemic. So we see a large proportion of our European retail banking customers and we're talking almost 80% very willing to buy not only to explore, serve, but to buy banking products. When you look at how many on average do that, it's surprisingly low. It's in the 20s. And why is that? Because the experience where I can really do that in a pleasant way, in an engaging way, is for most banks not yet there. Petrie, I reread the interview with your colleagues from 2017 before we met today. And I was struck by the drivers of innovation back then for the bank and wondering how they compare with those of today. You joined ING nearly two and a half years ago. Can you tell us a bit about the experience you brought from your previous employers to the Benelux? What if anything surprised you about what you found on the ground here? Thanks Matt. I think two quite different reflections that I had when I joined. So I think one was very positive seeing that how this agile capability on an institutional level, enterprise level was really true at ING. It is massive engine for creating innovation and having that in the muscle memory of the organization that it can really deliver wonders. It has created a great machinery for improving the experience. So that's first reflection. I think the second one was that to Markus's point that the experience is not there, even in plays like Netherlands, which is highly digital society at all corners of the society. Many of the processes, banking related processes are still pen and paper processes. Morghiz for example is a tedious process. It takes weeks for customers to get a response, whether you have an approval for your application. They are very clumsy processes at many places at the society, the data is not connected. So there is a lot of work to be done with the actual experience. Have you witnessed an organizational culture change in ING since COVID-19? Without traditional reporting lines, remote work, etc. Anything interesting that you've seen? What was interesting was that I think ING was probably better placed than many to face pandemic because it was an organization that had a lot of empowerment in the teams, a lot of independence, a lot of committed people who didn't need that direction on a daily basis from management. When people started to work in a more distributed fashion in their home offices, I think our setup was actually serving as well. And the culture survived pandemic very well. I think it carried ING through that pandemic very well, better than many other places. And if I may add here an interesting thought that you bring that new way or agile way of working allowed ING to react faster and more effective to the challenges. Being able to react nimble and be agile in the most positive sense was for anybody who started that journey before the pandemic actually a huge advantage. Yeah, and we saw that in practice. For example, when pandemic hit and we had to move call centers to be operating from home, it took ING a week to have a new operating model in that fashion. Same with mortgage advisory, which was 100% face to face pre pandemic. And then again within space of weeks, it was moved to all remote. Not every organization was able to make that happen. You now refer to ING as a mobile lead bank. That's an interesting choice of words and not of course unique to ING. But can you tell us why this is where you're focusing? Yeah, so this is for retail banking something that we consider that if we want to be relevant going forward in our customers lives ordinary customers retail customers, it needs to be within mobile because that's where you that's the remote control for your life today. You manage your friends, your family, your shopping, your life, by and large via mobile. At least it's an entry point to managing everything in your life. And if you don't exist in mobile, you don't really exist at all. So that was a starting point. So the it's really an entry point. And that's what we try to signal with this mobile lead. It doesn't mean mobile only, which is a very different concept. There are many interactions that we hope to continue to have with our customers also person to person. So not just digitally, be your first mortgage or your wealth planning or retirement planning. Most of our customers still prefer to have that interaction, but you can start also that dialogue via mobile. So that's why we call it mobile lead. And can you talk a little bit about where this came from? Where did the latest efforts start? What was the scope? I found that we had great capabilities in terms of building digital journeys and improving many of the processes. But we were perhaps lacking a comprehensive plan that how do we turn that into customer value? And that's what this mobile lead strategy for retail is all about. We first set an ambition that we want to be the best mobile lead bank on the continent. And Marcus referred to Finalta. We can actually verify whether that's the case. Traditionally banks have treated digital channels, call and brands as separate activity plans and maybe separate operating models. What we started to do was to connect the two. So take mobile and call often times when you need to reach out to call center, you start that with mobile, which means that it's actually a digital experience when you start it. When you then authenticated when you call the call center, it could well be that while you're waiting to get through, we can actually help you already. So if you need to block your card or have a new pin code or something transactional and simple, we can actually send that message back to your mobile before your call is picked up. And then customers are surprised and happy that actually I got my stuff done and I didn't even need to call anyone. It was a mobile experience. So that's channel connectivity. The first point. Second component back to again, what Marcus stated that the experience is not quite there on digital. So not all of the journeys on investments, for example, were available digitally. And again, I said an ambition to the team that will look if your journey doesn't start in mobile, it doesn't exist. So make sure that at least you can start that journey in mobile. And in last two years, we have moved I think 95% of our journeys, service and sales journeys to start in mobile. Not necessarily finished there, but at least you can start that there, including investments, markers. And then the third one, I think which is the real tricky one, which again, Marcus referred to the mobile led engagement. How do we retain that relationship that it doesn't become a transactional relationship, but is actually a relationship that builds on your previous experiences. You actually trust us to not only provide the simple daily banking, but also insurance and investment needs, which built on this notion of relationship. And that's much harder in digital. In bronze, we used to have this and Marcus knows this. You've been around for a while. So you remember in bronze is the old rule for advisors was that when customer comes in, first thing you do is that you lock the door. And make sure that the customer doesn't leave before you have covered all of the needs. Now in digital environment, we haven't found that lock when customers come in with whatever needs. How do we ensure that we capture the needs and actually build on that relationship? One thing I was wondering when you were talking then, I think it might be good for listening to get us an idea of scale, the number of customers that we're talking about here. So in other words, we have roughly 8 million customers in total for the retail bank, more than 80% of them are digital customers and mobile customers, and we have more than 5 million daily users on our mobile app, which puts us as the only non-social media platform in Top 10 in Netherlands. So there isn't any other commercial service, be it Telco's, Amazon, whatever, that would be in Top 10. You mentioned the example of somebody books on booking.com, a journey, and you come with the offer to have a travel insurance. This is relevant. And because it's relevant and not some random thing popping up, you might actually say, "Okay, they understand me. I trust them. That insurance is absolutely worth looking at." And hopefully, when they continue their journey and possibly buy this product, if I'm not mistaken, it's also the highest rated app in the Netherlands, the ING app. I'm quite humble about it. I think we're not very advanced yet with that relevant angle. So I'm completely on the same page with you. That's what will trigger that engagement. When you have more relevant messages, then you're just more likely to connect. Increasingly customers completely ignore the ones that are just not 100% on the right time. If it is 90% right, you just don't have the time or interest. There are many considerations on privacy using transactional data and making it simple enough and not intrusive. I think we're still fine in the right ways to do that. But I think we have found a couple of things like you said that where we can be proud as ING that what we've done, well, I think it's the simplicity of the design and not to make it more complex that it needs to be. So take personal finance management, which you know is one of my pet topics. Financial services have made it incredibly complex in many places. That you need to set savings goals. You need to categorization. You need to do all kinds of things as a customer to then maybe get some insights that are relevant for your personal financial management. And that traction is completely different. We see millions of customers using that. Because it's simple. When you open your balance, you can see that, okay, what's going on in next 30 to 60 days. Maybe my energy bill is going up. And this is the impact that it has on my cash flow. It's not complex. You don't need to do anything. So that simplicity of the design is one of the big learnings we've had. Customers are not as excited about making financial plans as we are. They've got other things in their life. Can I ask a little bit about talent? Drawing back to the 2017 interview. One of the things that leapt out at me was a change of culture that they talked about then. I think one of the interviewers said we made it clear that engineering skills and IT craftsmanship are what drive a successful career at ING. I was wondering about the kind of tech talent that you've needed to bring on board or to develop to deliver the current strategy. How do you approach that in today's retail bank? First of all, it is a big challenge for all of our industry and many other industries. We all compete on the same talent pool. Same type of quarters are needed with all of these API-based solutions that we have. That's reality. And we all find very hard to find the right talent in the different locations. This is not a European battle. This is a global battle for talent. I think ING is well placed that we have broader presence as a brand, global. That helps a lot. And then also this culture and this DNA of innovation, I think, is attractive for many of our engineering talent. Luckily, they don't just come for the package that is offered, but they also come from the aspiration that, okay, with this company, I can make wonders happen. So I think the second emerging challenge with the talent is related to not just engineering skill, but the commercial skills are on digital. So we see that we need a new type of talent who can manage the digital relationship and work with analytics, the martyck platforms, adobies and others of this world. And that's something that is still developing in the market. So there's a very short supply of that skill. Mark, I don't know if you want to add anything there from a European or a global perspective from what McKinsey's seeing. We have a lot of thought leadership around this. The reports on the great attrition and tech talent, tectonics and what's happening in that global market. I think we saw over the last four or five years ending actually in 2021, an incredible boom in the tech sector. So talent got incredible offers, nor star what they wanted to develop, a very entrepreneurial environment. I&G had the huge advantage that they were the first one, also publicly, acknowledged as a traditional company bank that is working like Google. I remember the headlines in the Netherlands five, six years ago. So the first wave of tech talent really being attracted by a bank, that advantage I&G had. And inspired by I&G, many institutions, also lots of banks have been following. In the case of other institutions, it has just been the kind of the attractive packages that they could offer. The journeys have been very difficult for many financial institutions. It becomes now easier in 2022, as some of the thousands and thousands of these very talented engineers who have been in all kinds of startups are now looking for different opportunities. So I see that the banks in this current environment will become again attractive employers for tech talent. Let's move to customers. Now, what do you think it's been like to be a customer of I&G over the last few years? How has the customer experience changed? I think our aim was to make it easier for our customers and make it simpler and faster, simplicity of design that I talked about. And I think we're glad to see that or pleased to see that the response is really good. So in terms of engagement, the number of people using our platforms, but also the straight feedback in terms of MPS, it has improved really a lot. Which is almost counterintuitive that if you have less services in some ways offered in across the channels and there's just more digital offered, you could expect that some customers are not finding it better, but now the universal feedback is that we're really improving with that. And for the first time, we had the number one in terms of MPS in Netherlands. So we're very proud and humble about that, that we need to continue to work to keep that position. And what are your thoughts on how on the one hand to be customer focused and intent on those customer journeys? And on the other, relentlessly focused internally on operations and digital innovation? So they can sound like competing aims. How do you marry the two? Yeah, it's a good question. I think oftentimes they're not really competing or conflicting. Because if you think of it from a customer point of view, oftentimes the fastest, easiest process is also the most pleasant process. When we make something super easy, straight through process or what have you in terms of ordering a new credit card or what have you, it's a pleasant experience for the customer and our upstyraxors are pleased with the fact that it's also a straight through. I think it's probably more about prioritizing the small pain points for customers that they feel very strongly. And then the bigger process things that are maybe not that visible for customers, but we still need to work with in the back end. That's where we have dilemmas. Just building on what you just said about processes, you mentioned previously that some processes for regulatory reasons, link to data. Where do you see for you and for other banks in the Netherlands, the main processes or challenges where you say a more digital seamless process would also create an even better customer experience? I think there's two parts to that, Marc, that I see. One is that we need to do a better job at the bank. We still have a lot of legacy in our systems, but also legacy in terms of our policies and practices that we expect customers to follow a certain process that was maybe defined 30 years ago in our risk policies. We just need to go back to some of those design principles that are still a valid sequence, that how do we expect customers to interact with us? So that's the work that we need to continue on the bank side. I think the other side is the broader societal conversation that what is a good way to deal with data and privacy and take lending processes where a lot of this is about verifying what is the income of the customers and what are the expenses? For example, income detection, there's all kinds of technologies on that, but there are also lots of records that we hold on customers that have regular income. We have tax data, all the rest of it that is already there. But the different perspectives as to what is in the customer's best interest of utilizing that data. So let's take a look at the same thing. going forward. Petrie, I want to go back to a point that you may before you were talking about the net promoter score and how customer experience seems to have improved despite a reduction in number of branches, for example, and the places where people perhaps access services personally in the past. What was it like letting go of so many people? There were obviously a reduction in headcount due to the strategy, and also closing branches is always difficult. Can you just talk a little bit about that experience and what that was like? So Matt, I think there's a super important question, which we've given a lot of thought for and discussed with our team. And I think the guiding star for this is really the justification for the change that needs to start with customer. And Ingi's culture, in particular, it's also a Dutch culture that is really creating a collective justification for making changes. So management doesn't decide on what kind of change is justified. The organization itself defines that what is a good change. So in a way, our staff need it to agree that, okay, this is a good change for our customers, and from their own transformation is relatively easy. If we don't have a change that is good for our customers, it just don't happen. It doesn't happen very easily with this kind of culture. You need to really be certain that we are doing the good thing for customers, and then modifying our service model, finding new jobs within the company for our people that don't have the job anymore that they used to have, all of those things will follow. If there's a solid benefit case for the customers, then things are much easier. So that's where we really spend a lot of energy, explaining learning together with our staff that, okay, what works better with our customers. And then I think we were held by committed staff. People were accepting the transformation also on a personal level, not only on an institutional level, but on a personal level that, okay, I need to re-skill myself, I need to learn something new, because this work that I used to do is not as relevant for our customers anymore, so I probably need to move to another function. So we've had hundreds of people move to new functions, risk management, other functions, and that has helped a lot. One point I would like to add here from an outside perspective. So when you look at the overall number of points of possible interaction, yes, it is lower than 15 years ago, but it has a more segmented approach. Where do we need big points of interaction? So where do we have I&G houses, as you call them, and where do we have service points? And the service points are where the customers want the service point, so can you tell us a bit more about that? Yeah, so that's right. So I think we, when we went about this change in the service model, an interaction model with our customers, it was not only about reduction. So we used to have hundreds of traditional branches, and when the reduction of that started, because there was less demand and customers found it easier to, I don't know, get a new credit card, via mobile, we saw the need of this change, but it was not only a reduction, but to your point, we also introduced new concepts. And one of those was this digital service point, which is a franchise shopping shop, if you like, in areas where people go during their normal visits, shopping visit, or whatever. So it could be attached to a bookstore on a high street, and then there's a digital service point that you can get coaching on how to better use your services in other channels. So it's not a branch, it's a service and coaching point. And those we have added in big numbers, and that gives better accessibility for our customers, it's actually easier for many of those vulnerable groups that don't want to travel longer distances. So I think that's the balance that we were seeking, and it has worked well. It has worked well. But indeed, the traditional number of branches, I think, is the lowest now in Europe compared to the number of active customers. We have less than 60 branches with 8 million customers. And I hear that what you call a branch of the house, the concept of the house, is also admired by many as quite innovative, because you give this bigger physically presence, a meaning beyond I go there and maybe get some cash and a little bit of advice. So what can you do in an IG house? How should we imagine that? I think these houses are now really the centers of expertise, if you like, for customers that have a variety of needs. So we typically have business banking, private banking, mortgage advisory, investment advisory in that area, in that house. And that's beneficial from customers perspective, because often there's connection with these different needs, and you can have that expertise in same location. But it's definitely a benefit for the staff, because you can cross-fertilize your information about customers, you can learn from different things, because you're located in the same place. So I think that's the second big benefit. Plus it gives a bit of a feeling that you're actually having substantial presence somewhere, just have seen them dramatic change with this. So majority of lending conversations be it on mortgages or business lending are oftentimes remote. And we need to have those facilities available in the houses. So we have modified some of that design that the houses are not only customer interaction points, but they are also points where our staff can have good interactions with customers remotely. COVID-19 drove generations of people on to mobile that perhaps hadn't been before. What role has that played? What impact has that had? It naturally increased the importance of the digital channels. But I think it was maybe not that big change as we expected. I think the bigger change was actually the way in which the human interaction format changed. For example, remote advisory that didn't really exist in many countries before COVID has really picked up now. When there was no possibility to meet face-to-face in a branch for mortgage advisory, people started to try out video meeting. And then when they tried that out once, they realized that actually this is much easier. I wanted to turn now to a very current issue in today's economic climate. It's featured really prominently in your marketing as a notion of ING values to help people at every stage of their life. Of course, right now, everyone's worried about inflation and poverty, frankly, in the current economic situation. What's ING thinking on this? What role can the bank play? Yeah, so super important question and something that is dear to ING, like you said, Matt. So this is close to our hearts that how do we find a way of staying relevant partner for our customers as a financial partner and looking after financial health and help with the planetary health, which is the other concern that our customers have? I think I mentioned this example, this simple example of how we can help, first of all, customers to understand that what their situation is. This look ahead function in your app that you don't need to do anything special, but you can just have a better understanding that, you know, how your finances will look so term, which is where it starts, that you have a grip of your financials and you understand that. And I think we are already delivering those kind of solutions for customers in a reasonably good way. They're not too complicated or too sophisticated for anyone to use, because oftentimes what we find is that those who are not financially well also have find it harder to get to these sophisticated planning tools. So you need to make it simple, the simpler to you make it, the better chance you have of actually helping those who are in the most need of those tools. So that I think is the first one. Then I think the second one is to continue to offer solutions that okay, how can you manage the energy balance of your home partner with the ecosystems around sustainability? What would be a concrete example for that? Let's say people are now in need in this ecosystem. What would they find that helps them with their kind of difficult financial situation? So I think this first point about understanding your financial health is what we're doing. We need to continue to work with that. I think the second dimension is actively helping customers with suggestions what you can do, how can you help yourself becoming more financially healthy? I think we've tried out different ways of doing that. One is to improve for example understanding of sustainability. Everyone talks about energy sustainability, but people don't know what to do about that. So Matt, one of the things we're looking at is that who can we partner with that can offer concrete help for our customers. For example, customers have a question, how do I make my house more energy efficient? We search for partners that can help our customers with these big questions on sustainability and financial health. One of the examples is that we have offered a scan on people's homes that what I can do to help make it more energy efficient with double glazing or insulation or other activities. So we are promoting that service and subsidising that service for our customers. And now a very fun question. Let's talk a little bit about the future. What does the future look like? If you can look into your crystal ball battery at the situation locally and across the region over the next five to ten years. What are your predictions? A couple of things that I think are likely to happen. One is that all of these little frictions and pain points that we have currently based on legacy, they will be ironed out. So I think we will solve the issues with linking our data with the public sources and having income detection and everything else done in a small way. So I think next thing you. we cannot afford not to solve those. That it will be frictionless, easy, everything is available digitally. So I think the mobile led story that is an aspiration now has become reality. The second one that I think Markus referred to at the beginning, the relationship and engagement part, who will become the aggregator, who will become the trusted partner for customers, giving advice on financial health or sustainability, or other big themes, will banks be able to retain that? Because we do have an upper hand in that now. There's a traditional relationship that we are holding, and so customers are still likely to turn to us for advice on big life events. Will that continue to be the case? What do we need to do to hold on to that? I think it's going to be a big question for banking as an industry. Then I think the other things in Europe that will happen, maybe economically, is that the age in population, wealth accumulation, need for financial advisory will increase. There's going to be new set of questions that will come to society that pension systems will not cover. They were not designed for this period of life that people live very soon. And there will be new mechanics and new type of advisory that is required with that. So that will be interesting. Who will strategically have this aggregator advisor role in the new economics? Mark, as I'm going to pass the crystal ball to you, what do you see in the next five to ten years? Given that in Europe daily banking will most likely remain unprofitable. The core question is where is the profitability going to come from? And the typical journey is around ownership of houses, cars, or whatever it is you would like, will be core to this. And then creating experiences, interaction models that are really compelling. 95, 99% of your interactions with the bank will be mobile. But the few ones where you make the effort and go there, how can this become something really special? Still there is a lot to do and for many it is catching up. Ultimately, the winners will create these true digital interactions that you cannot do in another channel that is very special, very relevant, very personal, and that will create this relationship that is hard to break. It's an exciting time. It's a very challenging time and it's a time when leaders will move further away from others and we believe also due to that in retail banking and banking in general, we will see also in Europe more consolidation. Not the winner takes all model, but the winner takes a lot. Marcus Petri, thank you so much for joining us today. McKenzie has published a number of insights relating to the topics we discussed in the podcast today, including a new flagship report on the future of retail banking. But for now, thank you very much for joining us today and we look forward to seeing you next time.