As chief executive of ING, Ralph Hamers’ faith in the Dutch bank’s digital leadership was so strong that he embarked on one of the world’s most ambitious bank transformations.
This was a project to integrate ING’s various country-level operations more closely than a leading cross-border banking group had ever tried before. It wasn’t long before doubts started to emerge.
It is not that Hamers’ project has had no success at all. Previously, ING had two separate branch networks, even in Belgium. Parts of the corporate centre, especially in the Benelux region, are more incentivized to work together today.
However, trying to integrate different national IT systems proved a distraction. It impeded its commercial success in Belgium, disrupted staff and made customers worry about their data. Much of the Belgian and Dutch systems remain separate.
Model Bank was Hamers’ equally ambitious parallel project, later renamed Maggie. This attempted a similar operational and IT integration not of two countries but four: Spain, France, Italy and the Czech Republic, which are all places ING has smaller online-only operations.
The ultimate aim was to bring them together with the newly integrated Benelux platform and its bigger digital bank in Germany.
Let’s hope UBS’s chairman Axel Weber isn’t starting to wonder whether he has made the right choice
Now Hamers’ successor Steven van Rijswijk is abandoning this idea. In the third quarter, he wrote off €140 million from Maggie’s capitalized software costs.
The need to save money because of Covid-19 is one reason; the other is that van Rijswijk can more easily admit it was unworkable than Hamers, who left in July.
Hamers pinned his reputation as a digital evangelist to Model Bank and Unite, which the Benelux version was called.
“You can go for 100% harmonization of the back end,” Hamers affirmed to Euromoney in mid 2019. “Once I have Model Bank up and running in Spain, I can open up in any country in Europe.”
However, under van Rijswijk, building ING as a global digital bank will essentially be much more restricted to the front end – in other words, the mobile app – and to insurance, savings and consumer finance.
In doing so, he is moving ING back in line with peers such as BNP Paribas and BBVA. Some software development will be reused between countries, but things such as mortgages and current accounts will be specific to the local market, as will the core banking system.
“The complex and costly cross-border integration of local systems and products under the Maggie programme will be discontinued,” the new CEO stated on the latest results call.
In practice, this was already where the bank was heading during the last couple of years. Perhaps the project’s best claim to success is that its Dutch and Belgian customers use the same app.
Nevertheless, ditching Maggie will damage ING’s credibility as a digital-banking leader. It is a blot on Hamers’ legacy, just as he takes over one of the most prestigious jobs in the global banking industry, as CEO of UBS.
More fundamentally, Maggie’s demise brings into question the ex-CEO’s vision of an easily exportable digital retail bank. Some also wonder if rowing back on Maggie signals less enthusiasm generally to invest in its four countries.
Its market shares there are much smaller than in Germany, where a similar online-only set-up has benefited to a greater extent from a prior lack of digital-banking competition, and above all its 2001 acquisition of first-generation digital bank DiBa.
Wider implications
The U-turn bodes further ill for efforts by other banks – most recently Santander – that are trying to do more to integrate their own international retail networks through digital means.
Let’s hope they can learn ING’s lessons and be a bit more realistic about what can be achieved in the near term.
Hamers was not only one to make such a mistake last decade.
As CEO of Nordea, Casper von Koskull embarked on a project to rip out the IT systems of its incumbent banks in the four Scandinavian countries and replace them with one new one.
The expense, complication and time involved may have cost him his job, although his exit was also precipitated by insufficient spending on money-laundering defences and by failing to keep a tighter lid on his corporate and investment bank.
Alas, these errors of von Koskull are all things that Hamers got wrong, too. A smaller and more focused wholesale bank, then, is the other element of van Rijswijk’s new regime.
His announcement of the closure of ING’s offices in South America, and some of them in Asia, follows this August’s news of the departure of its head of wholesale banking, Isabel Fernandez.
More worrying for the future, though, is what all this means for UBS. To be fair, Hamers took stringent actions against money-laundering risks before he left.
Yet, in other respects, the extent to which ING’s new CEO looks like he is clearing up after his predecessor makes the latter’s departure to UBS look more like a relief than a loss.
Hamers seems to have been so good at talking up ING’s digital advantages that he started believing his own rhetoric, while disregarding risks and inefficiencies building up in other parts of the firm.
Let’s hope UBS’s chairman Axel Weber isn’t starting to wonder whether he has made the right choice.
