Petri Nikkilä joined ING in 2020, just in time to observe the company’s agility in transitioning to remote and hybrid work arrangements. However, he found that ING, like other European banks, was lagging other industries in its use of digital channels to serve customers. As ING’s head of retail market leaders for the Netherlands, Belgium, and Luxembourg, Nikkilä harnessed the agile culture to lead a digital transformation, announcing to employees, “If you don’t exist in mobile, you don’t really exist.”
Nikkilä recently joined McKinsey’s Matt Cooke and Marcus Sieberer to talk about how that transformation is unfolding. With Sieberer offering background on the industry, Nikkilä describes how a relentless focus on customer experience is enabling ING to succeed with its mobile-first operating model. He makes the case that mobile technology alone is insufficient; banks also need to build meaningful customer relationships by offering relevant messages and easy-to-use processes. The following transcript of their conversation has been edited for clarity.
Matt Cooke, McKinsey: Back in 2017, the McKinsey Quarterly interviewed two executives from ING. That interview focused on the then-two-year-old agile transformation journey that the bank had embarked upon in 2015. It struck a chord with banks and financial services providers all over the world and was one of the most read articles on all McKinsey platforms for several years.
Today, five years later, we are back at ING Amsterdam to discuss the bank’s continuing transformation and also reflect on what an intervening five years this has been. Tragedy, disruption, turbulence, and innovation are some of the most appropriate words that spring to mind. Today we’re going to focus specifically on the retail bank, ING Netherlands, and its digital evolution based on a mobile-led strategy.
And to do this, I’m very happy to be joined by Petri Nikkilä, ING’s head of retail market leaders for Benelux. Petri joined ING from the Nordea Group, where he was chief commercial and digital officer, and prior to that, he spent a career of more than 15 years in consumer goods and financial services with Unilever, Mars, and HSBC.
I’m also delighted to welcome my colleague, Marcus Sieberer. Marcus has been with McKinsey since 1995 and today, as a senior partner of the firm, serves banks and private-equity firms across a range of topics, including comprehensive transformation strategies.
Welcome to you both.
Marcus, I’m going to start with you, if that’s OK. It feels like the word innovation is synonymous with banking. It never stops. I wonder if you could start us off perhaps by painting a picture of where European retail banks stand today on their digital transformation. Where are most on their journey, and what’s McKinsey seeing?
Marcus Sieberer, McKinsey: What we see is that we are currently, for retail banks, in a pretty difficult situation. When you look at the average, during the pandemic, the use of the branch went down quite dramatically, and digital sales could not fill the gap. Finalta, our benchmarking firm, showed us a quite stunning number of −14 percent of sales in 2021. And that goes across all core products—current account, savings, account cards, etc.
So why is that happening? Is that happening because customers are not interested in buying more or getting better services digitally? No. Customers are super willing, have never been more willing. You see this megatrend happening in the direction of more digital interaction, engagement, and ultimately buying that happened over the pandemic. We see a large proportion of our European retail banking customers—and we’re talking almost 80 percent—very willing to buy, not only to explore, serve, but to buy banking products.
When you look at how many banks on average do that, it’s surprisingly low. It’s in the twenties. And why is that? Because the experience now, where I can really do that in a pleasant way, in an engaging way, is for most banks not yet there.
Matt Cooke: Petri, I reread the interview with your colleagues from 2017 before we met today, and I was struck by the drivers of innovation back then for the bank and wondering how they compare with those of today. You joined ING three years ago. Can you tell us a bit about the experience you brought from your previous employers to the Benelux? What, if anything, surprised you about what you found on the ground here?
Petri Nikkilä, ING: Thanks, Matt. I had two quite different reflections that I had when I joined. One was very positive: seeing how this agile capability on an institutional level, enterprise level was really true at ING. It is a massive engine for creating innovation, and having that in the muscle memory of the organization can deliver wonders. It has created a great machinery for improving the experience. So that’s my first reflection.
The second one is, to Marcus’s point, the experience is not there. Even in a place like the Netherlands, which is a highly digital society at all corners of the society, many of the banking-related processes are still pen-and-paper processes. Mortgage, for example, is a tedious process. It takes weeks for a customer to get a response on whether you have an approval for your application. They’re very clumsy processes. At many places in the society, the data is not connected. So there’s a lot of work to be done with the actual experience.
Matt Cooke: Have you witnessed a kind of organizational culture change in ING since COVID-19? Without traditional reporting lines, more remote work, etcetera—anything interesting that you’ve seen?
Petri Nikkilä: What was interesting, Matt, was ING was probably better placed than many to face the pandemic because it was an organization that had a lot of empowerment in the teams, a lot of independence, a lot of committed people who didn’t need direction on a daily basis from management, so when people started to work in an even more distributed fashion in their home offices, I think our setup was actually serving us well. The culture survived the pandemic very well. I think it carried ING through that pandemic very well, better than many other places.
Marcus Sieberer: And if I may add, here’s an interesting thought you bring: that new way or agile way of working allowed ING to react faster and more effectively to the challenges. Being able to react nimbly and be agile in the most positive sense was, for anybody who started that journey before the pandemic, a huge advantage.
Petri Nikkilä: Yeah, and we saw that in practice. For example, when the pandemic hit and we had to move call centers to be operating from home, it took ING a week to have a new operation in that fashion. Same with mortgage advisory, which was 100 percent face-to-face prepandemic. Again, within a space of weeks, it was moved to all remote. Not every organization was able to make that happen.
Matt Cooke: You now refer to ING as a mobileled bank. That’s an interesting choice of words and not, of course, unique to ING, but can you tell us why this is where you’re focusing?
Petri Nikkilä: This is, for retail banking, something we consider, that if we want to be relevant going forward in our customers’ lives—ordinary customers, retail customers—it needs to be within mobile, because that’s the remote control for your life today. You manage your friends, your family, your shopping, your life by and large via mobile. At least it’s an entry point to managing everything. And if you don’t exist in mobile, you don’t really exist at all.
So that was a starting point. It’s really an entry point, and that’s what we try to signal with this “mobile led.” It doesn’t mean mobile only, which is a very different concept. There are many interactions that we hope to continue to have with our customers person to person, not just digitally, be it the first mortgage or your wealth planning or retirement planning. Most of our customers still prefer to have that interaction, but you can start the dialogue via mobile. That’s why we call it mobile led.
Matt Cooke: Can you talk a little bit about where this came from? Where did the latest efforts start? What was the scope?
Petri Nikkilä: I found that we had great capabilities in terms of building digital journeys and improving many of the processes, but we were perhaps lacking a comprehensive plan for how we turn that into customer value. And that’s what this mobile-led strategy for retail is all about. We first set an ambition that we want to be the best mobile-led bank on the continent, and—Marcus referred to Finalta—we can actually verify whether that’s the case.
Traditionally, banks have treated digital channels, call, and branch as separate activity plans and maybe separate operating models. What we started to do was to connect them. Take mobile and call. Oftentimes when you need to reach out to the call center, you start with mobile, which means it’s actually a digital experience when you start it. You then are authenticated when you call the call center.
It could well be that, while you are waiting to get through, we can actually help you already. So if you need to block your card or have a new PIN code or something transactional and simple, we can send that message back to your mobile before your call is picked up. Then customers are surprised and happy that “I got my stuff done, and I didn’t even need to call anyone.” It was a mobile experience. So that’s channel connectivity, the first point.
Second component, back to again what Marcus stated, that the experience is not quite there on digital. Not all the journeys on investments, for example, were available digitally. And again, I sent an ambition to the team that if your journey doesn’t start in mobile, it doesn’t exist, so make sure that at least you can start that journey in mobile. And in the last two years, we have moved, I think, 95 percent of our service and sales journeys to starting in mobile. Not necessarily finish there, but at least you can start that—including investment markers.
The third one is the real tricky one, which again, Marcus referred to: the mobile-led engagement. How do we retain that relationship [in a way] that it doesn’t become a transactional relationship but is actually a relationship that builds on your previous experiences. You trust us to provide not only the simple daily banking but also insurance and investment needs, which build on this notion of relationship.
That’s much harder in digital. In brands we used to have this, and Marcus knows this; you’ve been around for a while. You remember, in branches, the old rule for advisors was that when a customer comes in, the first thing you do is lock the door. You make sure the customer doesn’t leave before you have covered all the needs. Now, in a digital environment, we haven’t found that. When customers come in with whatever needs, how do we ensure that we capture the needs and build on that relationship?
Matt Cooke: One thing I was wondering when you were talking then: I think it might be good for listeners to get an idea of scale—the number of customers we’re talking about here.
Petri Nikkilä: In the Netherlands, we have roughly eight million customers in total for the retail bank. More than 80 percent of them are digital customers and mobile customers. And we have more than five million daily users on our mobile app, which puts us as the only non-social-media platform in the top ten in the Netherlands. There isn’t any other commercial service—be it telcos, Amazon, whatever—that would be in the top ten.
Marcus Sieberer: You mentioned the example of somebody who books on Booking.com a journey, and you come with the offer to have travel insurance. This is relevant. And because it’s relevant and not some random thing popping up, you might actually say, “OK, they understand me. I trust them. That insurance is absolutely worth looking at.” And hopefully, they continue that journey and possibly buy this product. If I’m not mistaken, it’s the highest-rated app in the Netherlands, the ING app.
Petri Nikkilä: I’m quite humble about it. I think we are not very advanced yet with that relevance, but I’m completely on the same page with you that it’s what will trigger that engagement. When you have more relevant messages, then you’re more likely to connect. Increasingly, customers completely ignore the ones that are not 100 percent on the right time. If it is 90 percent, you just don’t have the time or interest.
There are many considerations on privacy using transactional data and making it simple enough and not intrusive. I think we’re still finding the right ways to do that. But I think we have found a couple of things, like you said, where we can be proud as ING. What we’ve done well—I think it’s the simplicity of the design and not making it more complex than it needs to be.
Take personal finance management, which you know is one of my pet topics. Financial services have made it incredibly complex in many places. You need to set savings goals, you need categorization, you need to do all kinds of things as a customer to then maybe get some insights that are relevant for your personal financial management.
The look-ahead function in our app is completely different. We see millions of customers using that because it’s simple. When you open your balance, you can see what’s going on in the next 30 to 60 days. Maybe my energy bill is going up, and this is the impact that it has on my cash flow. It’s not complex. You don’t need to do anything, so that simplicity of design is one of the big leanings we have had. Customers are not as excited about making financial plans as we are. They’ve got other things in their life.
Matt Cooke: Can I ask about talent? Drawing back to the 2017 interview, one of the things that leaped out at me was a change of culture that they talked about then. I think one of the interviewees said, “We made it clear the engineering skills and IT craftsmanship are what drive a successful career at ING.”
I was wondering about the kind of tech talent you’ve needed to bring on board or develop to deliver the current strategy. How do you approach that in today’s retail bank?
Petri Nikkilä: First of all, it is a big challenge for all of our industry and many other industries. We all compete in the same talent pool. The same type of coders are needed with all of these API-based solutions we have. That’s reality. And we all fight very hard to find the right talent in the different locations. This is not a European battle; this is a global battle for talent.
I think ING is well placed in that we have broader presence as a brand, globally, so that helps a lot. And then also this culture and this DNA of innovation, I think, is attractive for many of our engineering talent. Luckily, they don’t just come for the package that is offered, but they also come from the aspiration that, OK, with this company I can make wonders happen.
I think the second emerging challenge with talent is related to not just engineering skill, but the commercial skills around digital. So we see that we need a new type of talent who can manage the digital relationship and work with analytics, the martech platforms, Adobes, and others of this world. And that’s something still developing in the market, so there’s a very short supply of that skill.
Matt Cooke: Marcus, I don’t know if you want to add anything from a European or a global perspective. From what McKinsey’s seeing, we have a lot of thought leadership around the reports on the great attrition and tech talent tectonics and what’s happening in that global market.
Marcus Sieberer: I think we saw over the last four or five years ending in 2021 an incredible boom in the tech sector. Talent got incredible offers with exciting North Stars—what they wanted to develop in a very entrepreneurial environment.
ING had the huge advantage that they were the first one publicly acknowledged as a traditional company bank that is working like Google. I remember the headlines in the Netherlands five, six years ago, so the first wave of tech talent being attracted by a bank, the advantage ING had. And inspired by ING, many institutions, lots of banks have been following. In the case of other institutions, it has been the kind of attractive packages they could offer.
The journeys have been very difficult for many financial institutions. It becomes easier in 2022, as some of the thousands and thousands of these very talented engineers who have been in all kinds of start-ups are now looking for different opportunities. So I see that the banks in this current environment will become again attractive employers for tech talent.
Matt Cooke: Let’s move to customers now. What do you think it has been like to be a customer of ING over the last few years? How has the customer experience changed?
Petri Nikkilä: Our aim was to make it easier for our customers and make it simpler and faster. Simplicity of design I talked about. And I think we were glad to see or pleased to see that the response is really good. In terms of engagement, the number of people using our platforms and also the straight feedback in terms of NPS [Net Promoter Score] has improved a lot, which is almost counterintuitive. If you have less services, in some ways, offered across the channels and there’s just more digital offered, you could expect that some customers are not finding it better. But now the universal feedback is that we are really improving with that, and for the first time, we are number one in terms of NPS in the Netherlands. We’re very proud and humble about that; we need to continue to work to keep that.
Matt Cooke: What are your thoughts on how, on the one hand, to be customer focused and intent on those customer journeys and, on the other, relentlessly focus internally on operations and digital innovation? They can sound like competing aims. How do you marry the two?
Petri Nikkilä: It’s a good question. I think oftentimes they’re not really competing or conflicting because, if you think of it from a customer point of view, oftentimes the fastest, easiest process is also the most pleasant process. When we make something a super-easy straight-through process in terms of ordering a new credit card or what have you, it’s a pleasant experience for the customer, and our ops directors are pleased with the fact that it’s also straight through.
I think it’s probably more about prioritizing the small pain points for customers that they feel very strongly and the bigger process things that are maybe not that visible for customers but we still need to work with in the back end. That’s where we have dilemmas.
Marcus Sieberer: Building on what you just said about processes, you mentioned previously that some processes, for regulatory reasons, link to data. Where do you see, for you and for other banks in the Netherlands, the main processes or challenges where you say a more digital seamless process would also create an even better customer experience?
Petri Nikkilä: I think there are two parts to that, Marcus. One is that we need to do a better job at the bank. We still have a lot of legacy in our systems, but also legacy in terms of our policies and practices that we expect customers to follow. A certain process was maybe defined 30 years ago in our risk policies, and now we need to go back to some of those design principles and ask, “OK, is this still a valid sequence that we expect customers to interact with us?” So that’s the work we need on the bank side.
The other side is the broader societal conversation: What is a good way to deal with data and privacy? Take lending processes, where a lot of this is about verifying what is the income of the customers and what are the expenses and, for example, income detection, there are all kinds of technologies on that, but there are also lots of records we hold on customers that have regular income. We have tax data, all the rest of it that is already there, but there are different perspectives as to what is in the customer’s best interest of utilizing that data.
I’m of the opinion that if we have transparency on the data between the different operators, the society can be a safer place because you don’t have mistakes in the data. Everyone knows that this is transparent, it’s promoting a society that is based on trust and things being visible, and we see that in many societies. I think that’s a big thing going forward.
Matt Cooke: Petri, I want to go back to a point you made before. You were talking about the Net Promoter Score and how customer experience seems to have improved despite a reduction in number of branches—for example, in the places where people perhaps accessed services personally in the past.
What was it like letting go of so many people? There’s, obviously, there was a reduction in headcount due to the strategy, and closing branches is always difficult. Can you talk a little bit about that experience and what that was like?
Petri Nikkilä: Matt, this is a super-important question, which we’ve given a lot of thought to and discussed with our team. I think the guiding star for this is really the justification for the change; that needs to start with the customer and ING’s culture in particular. Also, a Dutch culture creates a collective justification for making changes. So management doesn’t decide what kind of change is justified; the organization itself defines what is a good change.
In a way, our staff needed to agree that this is a good change for our customers. And from there on, transformation is relatively easy. If we don’t have a change that is good for our customers, it just doesn’t happen. It doesn’t happen very easily with this kind of culture; you need to really be certain that we are doing the good thing for customers. Then modifying our service model, finding new jobs within the company for our people that don’t have the job anymore that they used to have—all of those things will follow. If there’s a solid benefit case for the customers, then things are much easier. So that’s where we spend a lot of energy: explaining, learning together with our staff what works better with our customers.
Then I think we were helped by committed staff. People were accepting the transformation. Also, on a personal level—not only on an institutional level but on a personal level—“I need to reskill myself. I need to learn something new because this work I used to do is not as relevant for our customers anymore, so I probably need to move to another function.” We’ve had hundreds of people move to new functions—risk management, other functions. That has helped a lot.
Marcus Sieberer: One point I would like to add here—an outside perspective. When you look at the overall number of points of possible interaction, it is lower than 15 years ago, but it has a more segmented approach. Where do we need big points of interaction? Where do we have ING houses, as you call them, and where do we have service points? And the service points are where the customers want the service point. Can you tell us a bit more about that?
Petri Nikkilä: I think that is right. When we went about this change in the service model and interaction model with our customers, it was not only about reduction. We used to have hundreds of traditional branches, and when the reduction of that started because there was less demand and customers found it easier to get a new credit card via mobile, we saw the need of this change.
It was not only a reduction, but to your point, we also introduced new concepts. One of those was the digital service point, which is a franchise shop-in-shop in areas where people go during their normal visits, shopping, or whatever. It could be attached to a bookstore on a high street. And then there’s a digital service point that you can get coaching on—how to better use your services in other channels. So it’s not a branch, it’s a service and coaching.
Those we have added in big numbers, and that gives better accessibility for our customers. It is actually easier for many of those vulnerable groups that don’t want to travel longer distances, so I think that’s the balance we were seeking, and it has worked well. But indeed, the traditional number of branches, I think, is the lowest now in Europe compared to the number of active customers. We have less than 60 branches for eight million customers.
Marcus Sieberer: And I hear that what you call a branch of the house, the concept of the house, is also admired by many as quite innovative, because you give this bigger physical presence a meaning beyond. I go there and maybe get some cash and a little bit of advice. So what can you do in an ING house? How should we imagine that?
Petri Nikkilä: I think these houses are now really the centers of expertise, if you like, for customers that have a variety of needs. We typically have business banking, private banking, mortgage advisory, investment advisory in that area, in that house. That’s beneficial from customers’ perspective because often there’s a connection with these different needs, and you can have that expertise in the same location.
It’s definitely a benefit for the staff, because you can cross-fertilize your information about customers. You can learn from different teams because you’re located in the same place. So, I think that’s the second big benefit. Plus, it gives a feeling that you have substantial presence somewhere. We have seen dramatic change, with the majority of lending conversations, on mortgages or business lending, [which] are oftentimes remote, and we need to have those facilities available in the houses. We have modified some of that design so that the houses are not only customer interaction points, but they are also points where our staff can have good interactions with customers remotely.
Matt Cooke: COVID-19 drove generations of people onto mobile that perhaps hadn’t been there before. What role has that played? What impact has that had?
Petri Nikkilä: It naturally increased the importance of the digital channels, but I think it was maybe not as big a change as we expected. The bigger change was the way in which the human interaction format changed. For example, remote advisory that didn’t really exist in many countries before COVID has really picked up now. When there was no possibility to meet face-to-face in a branch for mortgage advisory, people started to try out video meetings. Then when they tried that out, they realized that actually this is much easier.
Matt Cooke: I wanted to turn now to a very current issue in today’s economic climate is featured prominently in your marketing: a notion that ING values helping people at every stage of their life. Right now, everyone’s worried about inflation and poverty in the current economic situation. What is ING’s thinking on this? What role can the bank play?
Petri Nikkilä: Yeah, a super-important question and something dear to ING, like you said. This is close to our hearts. How do we find a way of staying a relevant partner for our customers, and a financial partner and looking after financial health, and help with the planetary health, which is the other concern our customers have.
I think I mentioned the simple example of how we can help, first of all, customers to understand what their situation is. This look-ahead function in our app—you don’t need to do anything special, but you can have a better understanding of how your finances will look short term—which is where it starts, that you have a grip of your financials and you understand that. I think we are already delivering those kinds of solutions for customers in a reasonably good way.
They’re not too complicated or too sophisticated for anyone to use, because oftentimes we find that those who are not financially well also find it harder to get to sophisticated planning tools. So you need to make it simple. The simpler you make it, the better chance you have of actually helping those who are in the most need of those tools. So that, I think, is the first one.
Then I think the second one is to continue to offer solutions that say how you can manage the energy balance of your home partner with the ecosystems around sustainability.
Marcus Sieberer: What would be a concrete example? Let’s say people are now in need. In this ecosystem, what would they find that helps them with their difficult financial situation?
Petri Nikkilä: I think this first point about understanding your financial health is where we are doing reasonably, and we need to continue to work with that. I think the second dimension is actively helping customers with suggestions—what you can do, how can you help yourself become more financially healthy.
I think we’ve been trying out different ways of doing that. One is to improve, for example, understanding of sustainability. Everyone talks about energy sustainability, but people don’t know what to do about that. So Matt, one of the things we’re looking at is who can we partner with that can offer concrete help for our customers. For example, customers have a question: How do I make my house more energy efficient?
We search for partners that can help our customers with these big questions on sustainability and financial health. One of the examples is that we have offered a scan on people’s homes—what I can do to help make it more energy efficient, with double glazing or insulation or other activities—so we are promoting that service and subsidizing that service for our customers.
Matt Cooke: And now a final question. Let’s talk a little bit about the future. What does the future look like? If you can, look into your crystal ball, Petri, at the situation locally and across the region over the next five to ten years. What are your predictions?
Petri Nikkilä: A couple of things that I think are likely to happen. One is that all of these little frictions and pain points we have currently, based on legacy, will be ironed out. I think we will solve the issues with linking our data with the public sources and having income detection and everything else down in a smooth way.
In the next ten years, we cannot afford not to solve those. It will be frictionless, easy; everything is available digitally. I think the mobile-led story that is an aspiration now has become reality.
The second one, that I think Marcus was referring to at the beginning, is the relationship and engagement part. Who will become the aggregator? Who will become the trusted partner for customers, giving advice on financial health or sustainability or other big themes? Will banks be able to retain that? We do have an upper hand in that now—a traditional relationship that we are holding. Customers are still likely to turn to us for advice on big life events. Will that continue to be the case? What do we need to do to hold onto that? I think it is going to be a big question for banking as an industry.
And I think another thing in Europe that will happen, maybe economically, is that with the aging population, the wealth accumulation need for financial advisory will increase. There’s going to be a new set of questions that will come to society that pension systems will not cover. They were not designed for this period of life that people [will] live very soon. And there will be new mechanics and a new type of advisory required, so that it will be interesting who will strategically have this aggregator or advisor role in the new economics.
Matt Cooke: Marcus, I’m going to pass the crystal ball to you. What do you see in the next five to ten years?
Marcus Sieberer: Given that in Europe, daily banking will most likely remain unprofitable, the core question is: where is the profitability going to come from? Typically, journeys around ownership of houses, cars, or whatever you would like will be core to this, and then creating experiences, interaction models that are compelling.
Ninety-five to 99 percent of your interactions with the bank will be mobile. But for the few where you make the effort and go there, how can this become something really special? Still there is lot to do, and for many, it is catching up. Ultimately, the winners will create these true digital interactions you cannot do in another channel that are very special, very relevant, very personal, and that will create relationships that are hard to break.
It’s an exciting time. It’s a very challenging time, and it’s a time when leaders will move further away from others. We believe also, due to that in retail banking and in banking in general, you will see in Europe more consolidation—not the winner-takes-all model, but the winner takes a lot.
Matt Cooke: Marcus, Petri, thank you so much for joining us today. McKinsey has published a number of insights relating to the topics we discussed in the podcast today, including a new flagship report on the future of retail banking.
For now, thank you very much for joining us today, and we look forward to seeing you next time.