ING – Doing Some Thing(s) Very Well

Probably it’s just a coincidence that ING has two longish stories in the 4 January FT – one an innovative management framework from Bain that helps the bank keep its international operations in synch and another on how the bank is quietly extending its global reach, - an interview with Dick Harryvan, the board member responsible for ING Direct which now has 20 million customers. It even made Time Magazine's list of the top 50 Web sites for 2007.

Anything in common? Perhaps it is focus and clarity. The framework (known as TPE for Towards Performance Excellence – Lucy Kellaway, where are you?) aims to align (wasn’t that term officially buried in 2007?) strategy, structure and process aims to connect the dots, in the words of Jacques Kemp, who found the approach valuable in the Asia-Pacific region where 24 local businesses were conducting business in their own distinct ways. Significantly, Kemp thinks that a key part of his job is also understanding at least some of the details – his analogies range from architect to plumber. By grouping functions into units with clear goals and responsibilities, the framework helps improve communications – who does what, and why – in the bank’s Japanese operations. TPE is being rolled out to other parts of the bank – with luck it will acquire a new moniker along the way.

            ING Direct is quietly expanding from Internet/call center savings into 10-20 additional products, including checking, mortgages, and investments. This stealth approach could be a big winner, according to a KBW analyst.

            “Perhaps if you’re HSBC you say, ‘Why do I need to bother?’,” says Chris Hitchings, an analyst at KBW. “[But] if we look back in five, 10 years’ time and discover that deposit-taking is only 20 per cent of ING Direct’s profits and it’s making stackloads of money doing share trading, mutual fund supermarketing, payment accounts, mortgage accounts and so on, then it may well be that the HSBCs and Citi Corps of the world will kick themselves.”

            Harryvan notes that retail banks offer about 300 products across the range he is targeting, even though they know that only about 10 products account for 80 percent of their earnings.

            My own favorite was BankOne which bragged that it offered 1,800 different types of credit cards. Assuming these weren’t just five different plans and 1,795 university football and basketball team affiliate cards, what possible purpose could this have served? And who at the bank could ever explain the differences? Poor BankOne boss, Jamie Dimon, failed up to CEO of JPMC. Shows what I know. Guess credit cards weren’t so important, and he has kept the bank largely unscathed in the credit crunch. Probably easier to watch derivatives without worrying about 1,800 credit cards.

            Through focus on online banking, ING Direct has a 100 basis points advantage over the competition, whose attention is scattered across branches and other channels.

            As more and more bank customers become familiar with Internet transactions, how long can more traditional banks figure out how to provide high-cost branch channels and high-return and low-cost products through Internet-only channels?

And what did Time say? Easy to set up in eight minutes and paying 4 percent on checking, it beats Citi's .8 percent.