Banks setting up ecosystems with major players from completely different industries? Super apps that control our entire lives? Peter Adams, CEO of ING Belgium, isn’t their biggest fan. This being said, banks do have to revisit their offering and rethink their market approach, he says. But they’ll have to do it by making their products simpler and much more customer friendly.
We are living in an incredibly complex world that is going through an energy and climate transformation, where pandemics are occurring, where there is increasing regulatory pressure and where interest rates and inflation are behaving unpredictably. In such a context there is only one kind of bank that can survive: the bank that cares most about its customers. We should not make the world even more difficult, on the contrary, invest and innovate to make the lives of our customers easier, to make our offering more transparent, more efficient, bringing speed and simplicity. As an example: the offering of an average retail bank in 2020 had about 200 different products, no customer knew them all. Twenty products seem more than enough to me to cover the vast majority of our customers‘ needs. That implies that we choose to stay clear of large ecosystems. We don’t see added value in, for example, pushing soccer results or to sell cell phone subscriptions through our apps. That obviously does not exclude experimentation in these domains. But I think it‘s much more important that we offer true, real and in-depth banking expertise. Regarding crypto currencies or private banking, for example, a bank must remain the number one trusted partner for its customers.
CEO ING Belgium
Similarly, I am also cautious about hype and panic. It was once thought that Facebook, Apple and Google would inevitably wipe out traditional banks, as they have the most complete data sets and operate with the best customer interfaces. That never happened, in part because of the strict regulatory environment on data and privacy and the rules to combat cybercrime or antitrust activity the financial industry must abide by. This generates substantial margin pressure. Another example here is robo-advice. It definitely has its place and merits, but – at least today – customer research learns that clients willing to invest a large sum of money still prefer a proper discussion regarding their options with a banker, not necessarily face to face in a traditional branch, but with a human being. Digitalization enabled multiple new ways to interact with our customers, also in person, and led to significant branch consolidation. Today the number of traditional branches is also only a fraction of what it used to be. We don‘t need the physical location, but we need to cover various options for our clients to conduct their banking. We need to make sure our customers have access to the right banking solutions and expertise at their convenience.
Regarding those ecosystems that we‘re passing on: what is the only reason you would need these? To become so dominant that you get access to all possible data to exploit. What is the only market where this has proven successful? Asia. Not in the U.S. and Europe, and I don‘t see that happening anytime soon. By the way, it‘s not the amount of data that‘s the bottleneck, it‘s how we process and monetize that data. There are still enormous steps to take in how we apply AI to data, for example.
When will the transformation of the financial sector stop? Simple: never
Proactive in ESG
ESG, meanwhile, has become an integral part of our business. It is also still an ongoing process, and its interpretation is different than it used to be. Banks have long addressed governance issues and have, through the years, increasingly focused on social issues (putting emphasis on diversity, equity and inclusion). Today, banks invest in the “E” – environmental – in ESG. We also take a proactive stance here. We take certain steps not just because the regulator asks us to, but because we want to. We (can) play an important role in facilitating and financing a carbon neutral/low-carbon society. We also increasingly need to take into account environmental considerations on risk within our portfolios. So as a bank, we consciously want to attract a certain type of customer and prefer to avoid other types of customers. We need to increasingly inspire trust as we dare to take explicit positions, because we want to not only follow trends, but also shape them. That does not mean we absolutely want to exclude certain sectors. No, we want to help them in the transition of their activities. I also think we need to do that collectively, as a sector, at a European or even global level. With KYC (know your customer), for example, we have not been able to develop this into a uniform processes. With ESG, we need to do better. Integrating ESG in everything we do will allow us to continue to inspire trust, as trust is the foundation banks build upon.
I mentioned earlier that regulation ensured an influx of new, non-traditional entrants in the financial market remained limited. So, in a sense, regulation has provided us with some leeway to adapt and to strengthen our role as key provider of financial products. That is by no means to say that regulation has given us the luxury of not innovating. Constantly reinventing yourself remains necessary; otherwise you become irrelevant. Although this increasing regulatory burden makes innovation harder as costs rise, we are speeding up the pace of change and innovation by introducing more efficient digital flows and a superior customer experience.
Recruitment, reskilling and upskilling
Another major challenge to future-proof our organization is talent recruitment. The financial sector needs to become more attractive to employees. How can you convince young people that a bank is an excellent place to deploy and develop their talents? I think you can only do that if you align your values with their values – and by being consistent.
Technology and technological knowledge will obviously play a big role in recruitment. One technology that has become indispensable is blockchain, much more so than crypto currencies themselves, by the way. We need people who have a grasp of data, data analytics and digital delivery. I think, for instance, that banks can be very important mediators in smart contracts. But not everything is technology. It remains imperative that our employees also understand our customers and their business model.
Sometimes employees ask me when will all the changes be done and when will the banks‘ transformations stop. Honestly? I think that this will never happen. We will have to constantly adapt. And we must help our people with that. That‘s a huge challenge: making sure nobody misses the boat. Reskilling and upskilling are constant and ongoing processes. At the same time, we also make our workforce more global. We do this from a different perspective than in the past. Ten or twenty years ago it was only about cutting costs. Today, the labor market (in Belgium) is notoriously tight, and it is not expected to change any time soon. The job vacancy rate is (very) high, and we simply cannot find the talent in Belgium anymore. Therefore, we must increasingly look beyond the border to fill the gaps.
About the interviewee
Peter Adams had been with Boston Consulting Group for more than 20 years (most recently as Managing Director and Senior Partner). In early 2021 he became CEO of ING Belgium. At BCG, Adams was involved in some of the biggest transformations in the European banking sector, particularly in the Nordic countries, the UK, France and the Benelux. Adams studied Economics at UGent and the London School of Economics and Political Science and earned an MBA from INSEAD Paris.
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