ING DIRECT’s new CEO tells MPA editor Sam Richardson how the non-major will become the primary bank used by more Australians.
MPA: You recently referred to a ‘Chapter 2’ for ING DIRECT in Australia, with the focus on becoming customers’ core bank. How do mortgage brokers factor into this, given ING is branchless?
Uday Sareen: We actually commenced our business in Australia in 1999, and our first product was mortgages. We were branchless then; we are branchless now. In many ways we’re actually an 18-year-old fintech in Australia, and clearly our business model has been, on the mortgage side, through the broker channel. Clearly the relationships with brokers have grown from strength to strength, and close to 90% of our mortgages today come through the broker channel, and this is a key and significant channel for us.
So my response would be that brokers are at the heart of our strategy, and that’s not going to change; that will continue. I think the broker channel provides an informed choice and, most importantly, independence for our customers, and we think that is vitally important for a healthy and competitive mortgage market. So, clearly, as we start to diversify our products and grow our primary banking relationship with our clients, this is a channel which over the years we have partnered tremendously with, and that’s going to remain significant for us.
MPA: You’ve said you want to double the number of primary bank customers at ING DIRECT. Do you have a similar target for mortgages?
US: From a mortgage perspective I think it’s reasonable to assume that over the next couple of years we should be able to grow at 8–10%. Today we have a 3% market share, and if you look at our residential book, while we are planning to diversify and launch products and grow our balance sheet, clearly, from a mortgage perspective, we already are growing faster than market.
There’s another part of the mortgage segment which is growing even faster this year, and that’s commercial lending. While that is part of the mortgage section it’s different from residential, and whilst we’re starting from a small base here, over the past year we’ve grown up to 20% in that segment. So, overall, 8–10% is a reasonable estimate, and whilst I don’t want to get into forward-looking statements, close to 20% in the commercial segment, which is starting from a small base.
“Over the next couple of years we should be able to grow at 8–10%”
MPA: If ING DIRECT is going to gain market share, where is it going to come from: the majors, non-majors or non-banks?
US: I’ll talk about market share when we get to double digits! We’re at 3% market share, and so it really doesn’t matter where it’s going to come from. Of course it will have to come from competition, and 80% of the banking landscape is with the majors. We’re a low single-digit number, and I think from our perspective we’re confident about the strength of our proposition and product and pricing, and the fact we have industry-leading advocacy which is really driving growth in customers. So from our perspective it’s a small number, and there’s opportunity for us to grow it.
MPA: ING is known for particularly competitive rates. Will your proposition continue to revolve around rates or move to other areas?
US: ING’s value proposition has always been central to our offering. And when I say value, rates are a significant part of the value proposition, but really, if you look at the price-value equation, value for our customers has always been important, and I think, given our business model and our cost-efficiencies, we are able to pass on that value to our clients, of which pricing and rate are a significant component.
We will always ensure customers get value, now and in the long term, and I think increasingly products are getting commoditised, and the differentiation there is really about user experience and how that user experience can be personal and digital and frictionless. Those are the components which drive value, so you’re right: pricing is key. We will always be competitive and have an edge over competition, but our overall value proposition is central to us.
“Increasingly, products are getting commoditised, and the differentiation there is really about user experience”
MPA: What is the LendFast project and how it will help brokers?
US: We’ve actually undertaken, over the last three months, our largest mortgage origination project in the bank ever. We’ve just gone live, late last quarter, and the objective is the following: we’re looking a value proposition that is not just about rate. The highlight of [LendFast] is that it cuts the turnaround by one third, and then adds benefits to our broker proposition and our customers: live updates, and it empowers our brokers to do more with real-time information on the state of the application. Basically, the whole acquisition workflow gets streamlined, supporting our broker network. Ultimately, the bottom line is a more efficient and faster experience for brokers and customers.
That’s come on track last quarter, and we expect over the next few months the system to get stabilised, and then we’ll start to see significant improvements in our turnaround time and efficiency, in addition to specific features that provide real-time and empowering information to brokers and partners. This has, I must reiterate, been the largest investment in the back-end mortgage origination system that we’ve seen at the bank.
MPA: Does trying to cut turnaround time as much as possible risk compromising the fraud prevention strategies that all lenders need to have in place?
US: We are diligent with our policies, and clearly there is absolutely no compromise when cutting down turnaround times, or any relaxation in our systems and policies to prevent fraud in our portfolios. You’re right: I think the larger risk on the mortgage side is the operational risk aspect. So we work closely with regulators to ensure that we are well ahead of where we need to be in terms of risk management, and collaboratively with other international units across ING’s global network to ensure we have the best global practices.
We have the advantage of industry-leading tools and insights from our global ING practice: we are the third-largest mortgage book in the ING Group after the Netherlands and Germany, and so we are able to access insights from a fraud prevention perspective.
I’d just like to highlight here that there’s absolutely no question of any sort of relaxation of any policies. In fact, what acquisition workflow and LendFast do is actually enhance our capabilities in fraud prevention because it automates workflow, minimises manual intervention, hence the element of discretion and rules and parameters that get hardcoded actually reduce the potential and the incidence of fraud, in addition to the tools and insights we have, not just from ING Australia but from our group all over the world.
I agree it’s a key concern in our business. We are mindful of that, and so there’s no question of relaxation or offsetting of any of these policies to reduce our turnaround times.
MPA: Are there any new products, offers or initiatives on the horizon as we move into 2017?
US: I’m happy to say that just last month we had a significant launch, the launch of our first insurance product. We launched our home and contents insurance in partnership with Auto & General and we’ve launched that for our new home loan customers through the broker channel, and this is hot off the press, just days old.
It’s a clear and simple experience for the customer, and whilst this was launched just last month we’ve got a good response from our customers, and in the coming months we’re going to expand it through a staged rollout, with the next stage looking at our existing customer base.
Like I mentioned, brokers are a key channel for us, and next on the anvil is a credit card: we’re currently trialling the product with our staff, and later this year and early next year we’re looking to launch …currently we’re just launching with our staff, and ideally there’s the opportunity for us to take this to our partners and channels.
Our broker distribution channel is central to us, and as we start to diversify our products we can really work in tandem and take this partnership with brokers to the next level.
MPA: How would you like brokers to view ING DIRECT 12 months from now?
US: I started off by saying that for the past 18 years we were branchless, and we are branchless now; this is the key channel for us, with more than 90% of business through brokers. Clearly our intention is to partner with this channel and grow with the channel, and my endeavour is that they continue to see us offering great value and being easy to work with.
It’s not just about pricing or the rate. Of course we have to be competitive, but the entire value proposition, not just for brokers but for customers, is key and central to us. It’s about having great service, being there for our partners and our channel, and transparency is key here for us always. What you see on our website and what we publish is open and transparent and empowers our brokers and customers, so they always know that if there’s a particular pricing on the website, that’s exactly what they’ll get: there are no hidden deals.
“For the past 18 years we were branchless, and we are branchless now: this is the key channel for us”
The other piece is about being clear and easy; simple and efficient. Ultimately the bottom line is we have to add value to the brokers’ businesses, their customers and their partners. I just want to reiterate this is a channel that is key to us and significant to us, and we will continue to partner with brokers.
I’ve had the opportunity also, in my first four months, to travel interstate and visit Melbourne, Perth, Brisbane and Adelaide, and at each of these places we’ve had our annual broker roadshows. I’ve personally travelled to them and had facetime with close to 450 of our broker channel partners. That for me is absolutely key and important to us. I think we have had a great partnership over the years, and my endeavour is to make sure we take it to the next level. I always have time for them and I believe that’s key and central to who we are as a business.