Changing technology is a start; the real wins come when banking culture changes
To benefit from fintech’s innovations (and finance’s experience), approach one another with humility.
Benoît Legrand is the head of fintech at ING Bank and the author of Changeons la banque!, a French language book about changing bank culture. We talked about the speed of change, how you can spread innovation experience through your organization, and the importance of humility.
Heather Vescent: What fintech trends do you expect to gain traction in 2016?
Benoît Legrand: Banks have realized what digital disruption means. For banks, as it normally happens with change, at first they deny reality and hope for the best: “This will not affect us too much”—and if it affects us, it’s just marginal. Now they’ve come to the phase where they realize they should take advantage of it. We’ve seen a big shift in how banks look at those transformations from threat to opportunity.
HV: This is not the first time that technology has transformed banking. How is it different now than in the past?
BL: One major difference is the speed at which change is occurring. Banks are beings that move quite slowly. They are more like elephants than cheetahs. Banks need to understand that decision-making processes, risk-taking processes, might look a bit different than what they’re used to.
Customers in general don’t change that fast, either. The difference today is the consumer experience created by new fintech companies is such an exciting difference that it is worth it for many customers to make a switch. Banks also need a trigger to change their habits.
HV: One of the technologies that has gained a lot of attention in the last year is the blockchain. What is your perspective on it?
BL: The blockchain is a fundamental change to what a bank is. It’s a fundamental change to what any third party or trust party is. This is an open door to a totally new world. It might not be just a disruption, but a massive disruption. It is going somewhere; it is going fast; it will change banks; but how, precisely, is still somewhat unknown. Where it goes, I still have the impression that many people don’t really know.
We’ve seen a lot of blockchain initiatives. We ourselves are taking part in the R3 project at ING, so we are looking actively into possibilities. I see an opportunity for banks to reduce costs. The blockchain is less of a way of getting more revenue or customers, but a way of reducing costs and being more effective. It will have an impact on banks, and it will also have an impact on society in general. This is not only a banking issue; it is also a social issue.
HV: Most people are focused on the technology changes. You are interested in the cultural and human aspects of the digital revolution. Could you tell me a little about that?
BL: I strongly believe that the main challenge of the digital revolution, the transformation we are facing, is not the digitalization of banking. The big change we’ll see in banking, and in organizations more broadly, is a cultural change—changing the way we think, changing the way we make decisions from a vertical decision-making process, where executives have the power, the money, the knowledge to decide, to companies and ways of working, where we collaborate to find knowledge, where the whole organization is empowered to make progress.
Humility is key. Banks have to learn to learn to be invisible. Banks have been arrogant, they have been in the center of everything, and now the power is shifting. Ten years ago people asked, “Can I get access to my money?” And the bank would reply, “Come back on Monday. We’re closed; it’s 4:00 p.m. on Friday.” Banks have to realize that the money they manage is not theirs. This is their customers’ money, so they have obligations to those customers and they have to act accordingly.
This is a big change; it is a huge change. The power is shifting bit by bit from banks to consumers. The banks that do not realize this will certainly survive for a few years, but eventually customers will select their bank based on the ways they are respected by those banks. At ING, this is one of the highest values we put into consideration: “This is not our money, this is the customer’s money.” How can we help you with that money; how can we empower you in life and in business?
HV: What is your book, Changeons la banque! about?
BL: It is a France-centered book, while covering worldwide trends that apply to France. Over the last 20 years, ING has built the largest Internet bank worldwide, based on customer-centric principles.
First, overall consumer trends show power shifting to customers. Second, the crisis changed a lot of things in terms of regulations and risk-taking. Third is the digital revolution, which is coming much faster and having much more of an impact than we expected. Banks have to be humble, to go back to customer needs. You cannot just say this; you have to live this. Every single employee in your company has to be driven by this value. This is a big point, and there’s so much opportunity to take this customer focus seriously in France; for instance, French people pay yearly about $10 billion of banking fees—about $150 per person!
Bill Gates said that we don’t need banks, but we need banking. This is the clue. We need to help customers with their finances, but we need to be transparent and frank on that front.
HV: What do you think banking will look like in the short term, within, say, three years?
BL: In the very short term, I don’t sense a lot will change. Some customers of some banks might see some changes in payments. Another group might see something in lending. I think the changes will come after those three years.
In Europe, there are still some doubts about whether banks are behaving fairly and in the interest of customers. We need to gain back confidence by showing concretely that we are acting in the interest of customers. Only by doing this will we build long-term relationships with those customers.
HV: Regulators are interested in these technology changes and what they might mean, but as you mentioned earlier about blockchain, we know it’s going somewhere fast, but we don’t know exactly where. It seems in some cases, the regulators are actively collaborating to guide where we could go. They’re looking out for safety so a financial crisis doesn’t happen again, but they don’t want to hinder innovation by saying, “You can’t do these things.”
That seems to me to be kind of a new attitude toward regulators who might otherwise have said, “You can’t do that.” It’s more of a willingness to be open.
BL: Yes, I agree. Regulators see advantages of having a more competitive environment in banking, right? We still need to be careful whom you allow to offer banking services, in the contingency if those companies fail with the money of those citizens.
I see two trends. There are complex local regulations that are preventing movement, but on the other hand, there’s a willingness from the authorities to promote competition and make sure that new entrants find their way. We’d like to see a level playing field that is equal to all—new entrants and banks. Which is not always the case.
HV: I interviewed Bret King a few months ago, and I asked him if he were the head of innovation at a bank what he would do. He said, “I would do these three things: Learning as much as I can as quickly as I can, and experimenting, trying different things. And then, figuring out how to deliver every single product in the business in real time without a signature.” Do you agree?
BL: I fully agree with the experimenting and learning part. The key thing is making sure that the whole organization is experiencing those things. I would go even further. It is not only the innovation officers who should experiment, but these experiments need to be spread throughout the organization so that as many people as possible in the organization can participate.
Some banks have quite active venture capitalist activities and investment in fintech. The key here is how to make sure those technologies effectively work with your bank. How do they effectively spread out their culture of collaborative work through your bank?
This is how you make a cultural change—not by imposing it in speeches or in PowerPoint, but by having your own people experience it. Everything that makes the life of the customer simpler, making sure they spend less time on banking and it’s safer for them, is something we want to work. Is this really making life for my customer easier, faster, giving more trust in what I can do?
HV: How do you work with startups and other technology partners so you are able to spread that experience across as many people as possible?
BL: First of all, you need to make sure that your people are effectively incentivized to do so. If you only ask your people to deliver the quarterly results, then you will have people who are quarterly result driven. Quarter after quarter, this is not the way that you foster innovation and partnerships, because those partnerships require time, they require failure, they require wrong investments—these things pay off in the long term.
The second way, talking about ING, which operates in more than 40 countries, we are organized in a way where we share experiences and partnerships in different countries.
Experience sharing is something really key for ING, and we do this product by product and country by country. We have forums where different countries share experiences and decide together. They say, “Okay, you will do the pilot,” and then we share the experiences. By doing it themselves, then people understand what it means. It’s only by trial and error; it’s only by trying that you do.
I come back to the company culture. You need to have the necessary space within your culture and company to allow for this. If the guy who goes into a partnership fails, and is blamed for it and fired, who will be the next one trying to make a mistake? This is how you learn, and banks generally are not in that culture. Banks sometimes don’t differentiate risk management and risk avoidance.
HV: Do you have advice for people who are trying to make their teams or their organizations more like what you described?
BL: I would say spend time connecting with people throughout the organization to understand the business needs and to connect people as much as you can. This is really big part of my job. Knowing what is happening, talking to people, explaining, and putting all those people together.
Generally, people have good will. They want to move forward, they want to help, and we need to leverage this. It’s taking a positive stance toward people; looking at the half-full glass instead of the half-empty glass.
Start always by saying, “I don’t know.” I meet with someone, whatever rank they have in the organization, they have an experience; I need to listen to what they’re telling me and see what I can take from it. We’re back to humility.
HV: Do you have advice for startups that are innovating or disrupting industry and how they could better work with big organizations?
BL: I think it must be quite hard for fintech startups to move through banks, which are big organizations. My advice is to try to find the right place in the organization, where to go to not waste time. Then, move fast away from organizations that are too complex and not answering their needs. Time is key. Make sure you have a strong network behind you of people who can open the right doors.
The third advice is described in African philosophy. There’s an African proverb saying you should refrain from shouting at a crocodile before crossing the river. I’ve seen some fintech founders and startups criticize banks, saying they will all die and there is no future for them. Banks are really powerful. They might look as if they move slowly, but once they move, their power is immense. Banks have brands, they have money, they have customers, distribution power, and connections, and a lot of experience in banking. Startups don’t have that.
The question should be, “How can I be helped by a bank and how do I see the value of this bank in cooperating with them?” Try to find the right balance between what you, as a startup, can bring and what the bank can bring. Find a balance that both can have in a partnership.
HV: I’m really blown away at how you talk about the culture and the humility. It gives me a lot of inspiration for the future to hear you, in your position with your influence, talking about the need of serving the customers and putting the focus on what they need, what’s going to make their life better.
Coming from Silicon Valley, so many will say, “We’re going to do a startup and change the world and disrupt everything,” not realizing that it’s maybe not such a great idea.
BL: But on the other hand, you don’t want to stop them. This is valuable energy for all of us. Again, we can say that this also the right balance between young people full of energy, but they should also listen to what people who are 55 say—and again, with the same attitude of listening. Look, listen, admit that you’re not always right or wrong.
We always talk about those unicorns, about those companies that have been very successful, and there are hundreds and thousands of other companies that have failed. The question is why did they fail. It might not be because they had the wrong ideas, but maybe because they had the wrong connections, because they had the wrong balance between self-confidence and humility.