Strategy ING Direct U.S.A A.F.

Introduction:

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ING Direct U.S.A was an on-line financial institution with a focus on savings accounts and mortgages. They had expanded rapidly from 2000 to 2010 becoming the number one U.S savings bank, the number one th U.S direct bank and the 15 largest U.S bank by deposits. In 2010 the bank was faced with several challenges including new regulations, growing competition and capitol constraints from its parent ING Groep N.V. ING was very successful in Canada, paving the way for U.S expansion Unlike Canada, the U.S Banking Industry is very fragmented (top 5 banks controlled 26.6% of bank deposits versus 77% in Canada) Little differentiation between the major banks (products, services, fees) Industry was focused on driving revenues through fees to support a large base cost Y2K (dot-com boom) created a surge in the popularity of on-line commerce

Business Model: ING saves clients money by limiting its product offer and the high costs associated with running branches. The virtual self serve model provides benefits to customers in the form of; o Higher interest rates o Lower service fees o Simple to use, easy to understand products User-friendly website Low customer acquisition costs High-referral rate among existing customers (30%) Highest NPS among all U.S Banks Not afraid to fire high maintenance (high cost) customers Strong presence in Social Media Heavy investments in marketing and IT (viewed as key drivers of competitive advantage)

Corporate Culture: Developed an environment that encouraged entrepreneurial thinking, creativity and fostered open communication. Hired diverse people from non-financial backgrounds. People did not have job-titles employees were expected to be flexible in their work assignments. Worked hard to eliminate department silos and developed the Orange Code of conduct (ex. 7) Positioned as the consumers advocate against the banks that encouraged heavy consumer debt

Competitors: Ally NetBank (closed in 2007) Bank of Internet USA

Strategy ING Direct U.S.A A.F.

1. What is INGs current strategy and what are the pressures for change?

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The four main strategic levers were: Supporting the Online Presence with selected, prominent physical locations Hiring and managing talent to position the company for success Organizing talent to operate the firm Delivering market-leading results

The pressure for change is a result of new regulations, capitol and expenditure constraints (from parent organization) and increasing competition. 2. Does ING have a sustainable competitive advantage and if so, what is it?

At the time of the article, ING still had a distinct brand and customer interface. ING would need to continue to push the boundaries of IT innovation to stay ahead of the competition. 3. How important is INGs organization in delivering the strategy?

INGs organization was important to its success as their unique culture allowed them to act differently than other banks. However, as ING becomes a big bank its corporate structure takes on the appearance of other large institutions. As departments grow, the need for specialization will inhibit its flexible work model and unique corporate identity. 4. Given your analysis, what is your recommendation?

If ING add products and services, they lose their identity and risk becoming another NetBank. In order to capture other services required by customers, ING should join forces with another financial institution. ING should remain a separate division within a bank, to maintain their unique identity (ie. Canadian Scotia Bank model) while allowing for customer sharing with its parent. ING Update: ING Direct USA was sold to Capitol One in 2012 for $9B Arkadi Kuhlmann is now the President of a new start-up bank called ZenBanx Inc.