FROM RDS '08: ING Direct's Kuhlmann on Being Different and Saving the Industry

When ING Direct's chairman, president and CEO Arkadi Kuhlmann talks, people listen. Kuhlmann was the featured speaker at a morning session at the Retail Delivery show called Innovation Works. The bank chief, who prefers to camp out in the call center than sit in an office, discussed some of the secrets to being unique."You need grassroots thinking" in order to stand out from the thousands of banks in the U.S. "Look at the business model and do it differently," he told attendees. One way to do this is to look outside the banking industry since there "aren't enough unique approaches" within banking, Kuhlmann said. (This also includes hiring non-bankers.) ING looked at retail, airlines and other sectors and closely examined their operating models. ING found the grocery story model of particular interest, given the metrics they use to measure customer interaction. "This is a high volume, low margin standardized business," he said. And once a bank decides to go with such a model, it must stick with it or else risk unraveling all its efforts.

"You need a different attitude if you want to be different," Kuhlmann said. "It's comfortable to be the same as everyone else." When a bank decides to take a unique route, they risk being scorned by their peers. However, he added, at the end of the day, it's more important what the customers think."

Therefore, one of the most important things is to be able to identify and connect customers in a different manner from other banks. "Connect with customers on the things they care about-simple concepts that Main Street cares about. "In order to succeed, you must understand the psychology of how people look at money," he explained. "Our rates aren't the highest. We're not that much different in many ways. But people come to us for intangible reasons-beliefs, values. "Americans want someone to validate their beliefs of what's right."

The ING Direct model is one that sets out to democratize banking-everyone gets the same deal, said Kuhlmann, no matter how wealthy you are. Don't expect sweetheart deals and concierge service from ING Direct if you're a high net worth consumer, he remarked. "I like to tell rich people to go wait in line. There is no negotiation ever."

Some consumers just don't fit in with the ING Direct model, stated Kuhlmann. "We close 5,000 customer accounts per month. We do it with respect and professionalism.... But the customer isn't always right." This, he added, would shock most bankers.

Of course, the conversation shifted gears to the subprime meltdown. Kuhlmann expressed optimism for the industry. And had some very strong words for the critics and herd mentality. "I'm tired of the banking industry being turned into glorified distributors who sell to the guys on Wall Street who set the terms." ING Direct's mortgage model is to actually keep the mortgages on its own books. This, he said, is what the banks should have been doing in the first place.

Kuhlmann also scoffed at the 30-year mortgage. "Who conned consumers into believing this?" he quipped half-jokingly. "You can't guarantee your health or your marriage but you can have a 30-year mortgage."

He further asserted that homes shouldn't be considered financial assets. "A house is not a tax deduction in other countries. ... Keep the Wall Street guys from marching around with the American homestead." Go back to the fundamentals was the main thrust of his point-no down payment, no mortgage.

"We can re-engineer the mortgage industry," he stated. "But it can't be done by the Wall Street guys: it has to be done by us."