Interview with Benoît Legrand, Head of FinTech, ING Group
We had the opportunity to meet Benoît Legrand, Head of FinTech for the ING Group, who explained his view about the rise of FinTech in the financial sector and gave his point of view regarding the reinvention of the banking industry.
You were appointed Head of FinTech for the ING Group on the 1st of October, a position that has no equivalent in the banking sector. Could you explain what your job involves? What is your vision regarding your activity?
To understand the context of this nomination, we have to remember that innovation has always been a part of ING’s DNA. Technology and disruption are indeed fully integrated to our Group’s genes. From this point of view, ING Direct has many characteristics of a FinTech, 20 years before the concept even existed.
At the dawn of the revolution brought by FinTech in an environment where no one can be fast enough, the will to transform and create disruption appears more concretely in the ING Group’s strategy. This is where my role comes into play as its purpose is to deeply focus on transformation and ruptures.
In concrete terms, my function has a dual role:
- Prospect the external market to define sectors and niches in which we could use technologies that allow us to better meet our customer needs. With over 8 000 FinTech in the United States for example and 50 000 around the world, we have to continually make upstream strategic choices and premium selections. Thanks to these monitoring and market analysis, we can pragmatically define the Group’s partnership strategies.
- Optimize our operating mode within the group to better benefit from the opportunities offered by FinTech. This, to ensure that the best possible use is made of the many on-going initiatives within the group in different countries when it makes sense to do so, and especially, that they are widely spread among the staff of the Group.
I particularly pay attention to the cultural and human aspects of the digital revolution because I am convinced that this is the central issue of this revolution. It does not suffice to recruit a Chief Digital Officer to digitalize, it must also be implanted into the left and right halves of the General Director’s brain, and then the employees’, to absorb the enterprise’s strategy effectively. At ING it is in our favour to have a 49 year old CEO who is a “digital native”!
With regard to your personal track as the former CEO of ING Direct France and later ING Bank France, you certainly had international responsibilities in retail, private and investment banking. What lessons have you drawn from those experiences that are helping you in this new position?
I had the chance to have a career path that covers a wide range of banking activities by taking up several positions, in five different countries. This richness undeniably helped me develop a strong interest in what is happening elsewhere, and a passion for transformation. Moreover, transformation was at the heart of my work all these years.
This diversity of positions I held in the banking industry also allowed me to develop an open mind and attentive listening, both outside and inside the company. “Openmindedness inside the company” means a knowledge of the culture of the group, its challenges, its strengths and weaknesses; all necessary elements to lead a transformation in the 21st century. The understanding of Human Being has been crucial all these years, as I learnt the keys to mutual trust and conciliation, regardless of the subject.
In your book « Let’s change banking », you develop a positive reading of FinTech, contrasting with the common perception of FinTech as a threat to the banking industry. What are the opportunities for this industry?
Indeed, in the rise of FinTech I see many positive things for banks: FinTech wake them up and often shake them up violently. If those impacts cannot be felt clearly, it is due to the gigantism of banking organizations, which I tend to call « daddy’s bank », and the clients cannot bear this any longer.
All synergies around the FinTech revolution created an environment where everyone’s interests can easily converge.
- Regarding FinTech, despite all their technological intelligence, they will always lack two key success factors: a brand and a distribution capacity. Hence, it is in the FinTech interest to become a business partner, collaborate and cooperate with larger banks.
- On the other hand banks need the quickness, agility and innovative spirit that represent the very essence of FinTech. So in the rise of FinTech, I see an enabling environment to develop again a partnership spirit in which each party will recognize the added value of the other.
Crowdfunding is an example that illustrates this complementarity between the different roles of the parties: on the one hand, FinTech not only need a distribution power and a brand, but they especially need to build banking expertise, to be able to reliably analyse the credit risk which is peculiar to each funding applicant. This gets even tougher e.g. for small and medium enterprises which provide only very little information on their ability to generate cash flow, increasing the risk for the lenders. Default risk thus cannot be excluded. Banks on the other hand – sometimes out of line with the client needs and too slow, administrative organizations with too high operating costs – could see an answer in a crowdfunding platform which they were not able to give to their clients. A form of collaboration would therefore make sense. The challenge of our time is to enrich ourselves with the strengths of others, to create more added-value together.
This collaboration between small FinTech and banks is becoming even more vital with the increasing dominance of GAFA (Google, Apple, Facebook, Amazon), which have nothing to prove anymore in terms of distribution capacity and reputation. I think that within the FinTech movement, only the GAFA represent a real danger for traditional banks especially if banks and small FinTech do not react quickly enough to collaborate intelligently.
By launching the FinTech Village in Brussels, a start-up accelerator, you keep on innovating. What are your ambitions?
The idea behind the launch of the FinTech Village is to create a real banking environment for companies which aspire to develop themselves by using innovation. In this way we can brainstorm directly with those companies to find new paths, and experience them with our clients.
The difference with classic incubators is that the FinTech village works with companies that already have their product developed and pre-tested, looking to reach the production phase. Our role is thus to open up to them in order to help the economy grow and revolutionize itself.
What is also interesting in this experience, is our collaboration with partners such as Deloitte, Startup.be and SWIFT, an incumbent operator present in Belgium and provided with a world-famous expertise. This allowed us to capitalize on its knowledge of the local market where the payment culture is very strongly present.
Does this help you to plan the operating modes of tomorrow? Which skills are lacking?
From my point of view, the bank of tomorrow is first of all a technology company genuinely putting the customer experience at the heart of its model. To reach this transition in banking, data science skills need to be integrated – but not only that. In my view the client approach should be reconsidered generally, and ING is a pioneer in this field since we have been co-constructing our products with our customer for 10 years already (e.g. Web Café ING Direct in France). We have to transform and challenge the entire model. Putting the client at the center of the banking organization has become a commonplace – but saying so is one thing, implementing it in a tangible, coherent and sustainable manner is another thing.
Traditional banks have a self-oriented business model, focused on costs, while the winning strategy is to build a business model where you have to bring value to the client, so the client is willing to pay a fair price. The same principle is used in the business models of Uber, BlaBlaCar, Easyjet or Airbnb, which were able to adopt a new culture and disrupt the traditional ways of operating.
Have you identified priority areas of work in this transformation and reinvention of the banking model?
The banking reinvention will primarily be a cultural revolution, where banks have to develop a corporate culture allowing every employee – regardless of the hierarchical level – to express oneself; a culture focused on the customer, but also on the employee, who must learn to work in an agile mode to deliver rapidly the changes expected by the customer.
Of course, this approach is to be spread out to all the business lines of ING and around the world if we want to create synergies with FinTech; however some sectors are a priority because they are more exposed to the emergence of FinTech. The level of vulnerability of the banking businesses depends on two criteria:
- The ease with which one can attack them (it is easier to attack payment than private banking for example).
- The value one can make as a new entrant. This value depends on several variables: the “guaranteed strategic income” of the bank, the disproportionate price of the product compared to customer perceived value, inefficiency, added-value found in other dimensions such as Big Data for payment, or Customer Relationship.
In this regard, Apple and Amazon, which have also launched a credit offer to SMEs in the United Kingdom and are preparing to do so in France, have successfully managed to value data and re-sell them, while traditional banks have not yet used those data, or were prohibited to do so up to now. Thanks to this « hidden » value, new entrants are succeeding in imposing a strong price competitiveness, and thus attacking the traditional banks which struggle to cover costs.
In conclusion, and to answer your question more directly, I think Robot Advisory and Payments are the two areas that are the most threatened by the rise of Fintech. In the end, the customer will be the one who decides…