Boring business, great brand: ING
23 October 2008
A lesson about the power of branding drawn from the woes faced by Dutch banking Giant ING.
ING is fighting against a falling share price, after new rules required it take a €10 billion capital injection from the Dutch government (reports the FT’s Lex on 21 October) and Moody’s downgraded the savings bank (today's FT). While the analysts assess the banking giant’s market position and future earnings, there’s a lesson for us in branding.
ING is a savings bank for consumers. FT reporter Michael Sheen quips that chief exec Michel Tilmant “has spent many hours over the past year trying to explain just how boring the business model is.” Fast Company journalists William Taylor and Polly LaBarre make it clear how “bread and butter” ING is. Writing in their recent book Mavericks at Work, they say that the US arm ING Direct “doesn’t issue credit cards, market auto loans, or even provide traditional bank accounts….those services encourage customers to spend rather than save, so they’re not part of the model.” They don’t offer online brokerage, even though most of their customers bank online) because the invitation to trade wouldn’t chime with their commitment to make saving easy and financially rewarding.
This is the vision that makes ING tick – what Taylor and LaBarre dub “a distinctive and disruptive sense of purpose that sets you apart from your rivals”. The brand is inspiring, with its evangelical spirit and its funky stunts. And the public has responded. Per employee ING Direct is eight times more effective in attracting assets than the average US bank, say Taylor and LaBarre.
But the current predicament could be the price of this success. According Steen, what’s worrying investors these days is a portfolio of less-than-prime mortgages, most of which are held by ING Direct, the US arm. Steen says that ING Direct “only invested in them because it set itself up as a thrift – a saving association – and must by law allocate more than 55 percent of its assets to mortgages, which ING found it could not write itself as quickly as it took deposits.” Connecting the dots, it sounds like ING Direct did its job of attracting savers so well it was backed into the Alt-A mortgage market just to keep lending at pace.
It’s one of the perils of a regulated industry that marketplace success can carry penalties…. with all the real villains, it's a shame the champions of thrift are losing ground. Here’s hoping that over time, ING will come out a winner.