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Dutch bank ING is investing €800m in a project that will harness digital technology to grow its customer base from millions of customers to over a billion.
The project is the latest move in a continuous programme to redevelop and disrupt its own business model, according to Brendan Donovan, global CTO of IT infrastructure at ING.
It will see the bank, which has in excess of 34 million customers worldwide, abandon its legacy mainframes and replace them with agile, cloud-based services.
ING, which has a market capitalisation of €48bn, has used digital technology to reinvent itself several times since the financial crisis. It is now seen by investors as a role model for financial technology (fintech) startups that are posing new threats to traditional banks.
Businesses need to start disrupting their own business models now, rather than waiting for startups to do it for them, and the IT department can lead the way, Donovan told an audience of IT and human resource (HR) specialists.
“Start a movement in IT and the other units will follow. The IT unit understands digital the best,” he said, speaking at an industry conference.
But it’s not just about deploying technology. Businesses need to change the way they work and how they manage their staff. “Command and control is dead,” said Donovan. “Make employees back to people, with purpose, mastery and talent. They are not employees, they are people. If you don’t do that, the millennials will not stay with you.”
Bank crisis was a catalyst for innovation
In 2007, ING had more than 110,000 employees, 14,000 of whom were IT staff. It was acquiring three companies a quarter, and was number 13 in the Fortune 500 list. “We were one of the most profitable banks on the planet,” said Donovan.
A year later, the financial crisis struck. It was, said Donovan, a potential extinction event. “During this crisis, we decided to downsize – to right size. We became leaner, meaner and focused,” he said, speaking at the Workday Rising conference in Barcelona.
During this time, the banking regulators began asking ING not only for detailed financial reports, but the raw data behind them. To make this possible, the bank – which runs 8,000 applications, with hundreds of millions of interfaces – built a translation module to ensure that all of its data is in a standard format.
In 2012, ING handed over 20 million items of data. A year later, the figure grew to 220 million. By the first quarter of 2016, ING had been asked to supply 11.5 billion items of data.
Dutch regulators cracked down heavily on banks paying bonus payments, which forced ING to change the way it manages its employees and adopt a new company philosophy.
“We have a code in ING – it’s pretty simple: anyone in the company who has a problem takes it on and makes it happen, even if it’s not your silo, not your department,” said Donovan. The other two parts of the code are "helping others to be successful," and making sure "you are always a step ahead."
In the 10 years since the banking crisis, digital technology has taken off, and customers now expect instant service 24 hours a day. “We now realise you have to be available any time and place. There is no downtime,” he said.
Scrum and agile changed company culture
ING’s CIO at the time, Ron van Kemenade, brought in scrum, agile and DevOps to the Netherlands in the wake of the banking crisis. “This changed the way of working in IT in the Netherlands,” said Donovan.
But the changes in IT put huge pressure on the business, as IT started to release multiple updates of code to customers each day. “They don’t know what to do in this agile movement,” he said.
The changes prompted the bank’s Dutch chairman, Nick Jue, to visit Spotify, the streaming music service, to learn how it handles digital technology. He was amazed by the business culture.
“We decided to change the organisation model, and move 14,000 people to business DevOps,” said Donovan. This model puts employees in autonomous, self-directing teams, known as squads, which bring together marketing, business, user experience, IT and data analytics specialists.ING arranges the squads into tribes with interconnected goals.
And experts coordinate their work with other experts, through groups know as chapters, which each focus on a different business processes.
The new arrangements have been introduced across ING in the Netherlands, and are likely to be deployed worldwide. But squads will not be used in every part of the business. “The agile approach is itself agile, not cast in iron,” he said.
ING’s radical approach has now been recognised by the venture capital community as being on par with fintech startups.
ING’s newly appointed CEO Ralph Hamers got together with the world’s top venture capital investors, shortly after his appointment in 2013, and asked them how fintechs were going to disrupt ING. “They told him, ‘What are you talking about Ralph, we came here to learn from you,’. He realised, at that moment, that innovation was in the DNA of ING,” said Donovan.
Eating into to Apple’s pie
ING has responded to Apple Pay, Apple’s mobile payment service – which is seen as a threat to established banks – by developing its own mobile payment service.
The company has developed Payconiq, which is available in Belgium and similar technology will be rolled out in the UK shortly, under the name Yolt. “Payconiq could not have been invented developed by ING if we had not changed our skills and our way of working,” said Donovan.
ING worked with a fintech company, Kabbage, to develop technology to offer instant lending to small companies in the Netherlands and Belgium. The platform is able to combine data from social media with traditional banking data, assess the creditworthiness of companies, and offer them higher loans than would otherwise be possible.
Now, in the worst economic downturn, ING is growing its lending base faster than any other bank, he said. But as customers move to mobile payments, and typically contact the bank or make transactions eight times a day, it is putting a strain on the bank’s mainframe and data systems.
“It’s time to disrupt ourselves again. A month ago we relaunched our strategy. We recognised we need to be globally scalable. Having 35 million customers is one thing, but having one billion, which is my vision, is another,” he said.
ING’s HR technology programme
ING is replacing 250 incompatible human resource (HR) systems across nearly 50 countries with a single cloud-based HR service.
The company, which runs a range of HR systems from SAP, Oracle and niche suppliers, has moved to a cloud-based service to manage its global workforce.
It spent 18 months preparing to roll out the technology, which went live in the Netherlands in September 2015.
The project was essential preparation for a wider programme to redesign ING as a more agile organisation, said Brendan Donovan, global CTO of IT infrastructure at ING. “If you are changing organisation at same time, and you can’t measure how many people you have in the company, you are dead,” he said.
The main challenge in the project was not the technology, but simplifying the company’s business processes. “You have to clean up your whole organisation, invest in simplification. You have to talk to work councils, and buy off some of these benefits,” he said.
The company plans to roll out Workday to other countries over the next four years.