In the wake of industry reform allowing a single entity to own domestic banks, brokerages and insurance companies, several megabanks are now racing to build converged and integrated financial institutions in the hopes of attaining both economies of scale and economies of scope.
ING certainly heard the starting gun. Although ING Group, with over $500 billion in global assets, has had a U.S. presence since 1979, its recent activities bring the Dutch company to a new level of stateside prominence. In the past year alone, ING Americas has presided over a three-way insurance merger, the integration of its asset management subsidiaries and the launch of a direct bank for retail consumers.
Along with the challenge of fully digesting its recent acquisitions, ING hopes to develop the capability to cross sell its products and services across business units. By doing so, the combined entity may not only exceed the sum of its parts, but also might exceed its competition as well.
But someone has to tie the pieces together first.
Steven Stecher, CIO and general manager of ING Americas, Atlanta, is responsible for the development and deployment of technologies for the North, Central and South American operations of the firm. "We're trying to make it easier for all of our customer constituencies to do business with us," he said. "We're working towards integration and making the customer experience-whether you're a producer or an end consumer-to be as user-friendly as we can."
ALL YOU NEED IS HUB
To that end, ING Americas built a middleware "hub" between its distribution channels and its product offerings using IBM MQ Series and MQ Series Integrator. Dubbed the IFS (Integrated Financial Services) hub, one of its core functions is to maintain an index of all of the relationships customers have with ING across its various businesses. Then, the hub can fetch data from legacy systems on behalf of any distribution channel, whether an agent, a Web site or a wireless device.
"Giving consolidated statements either to our producers or to our end consumers requires a lot of integration," said Stecher. "Our middleware component is the key to moving forward."
Once the IFS hub connections are fully in place, each distribution channel will be able to access services and information from any part of the firm, limited only by business logic. "Let's say we have a financial planner that's part of our broker-dealer network," said Stecher. "We'll be able to offer their customers a very competitive banking opportunity for savings and loans through ING Direct; a suite of four- and five-star Morningstar-rated mutual funds; some of the top-selling variable annuities; and a wide variety of life products."
"That will have a substantial differentiating effect for us," Stecher added.
Another benefit of having a hub is that ING now has a common content repository.
"In the past, we'd have multiple Web sites, many of which weren't connected, all of which would provide content," said Stecher. "With the common content repository, we store information provided by the manufacturers, as well as by our legal and compliance folks, so we know that when a Web site extracts that information out, it's in compliance-it's been reviewed once, there's no redundancy, and there's no chance for erroneous information."
The hub will also make life easier for consumers, who will be able to use a single sign-on to access all of their ING accounts as well as those from other financial institutions through account aggregation services. "Whether it's providing a consolidated or unified flow of information to a company like Yodlee or Pershing or to a number of third parties we work with, we're absolutely going to do that," said Stecher. "The end consumer is in the driver's seat."
Finally, the global ING organization will eventually have access to XML-formatted data via the hub. "We're developing a 'bridge' to share information with organizations within ING but outside of the U.S. operations," said Stecher.
THREE THE HARD WAY
But the task of linking together legacy systems, especially in insurance, isn't an easy one. "The insurance industry got into technology fairly early and many companies haven't abandoned things that were developed in the 1960s and 1970s, so some of our peers could have as many as 30-40 different systems - and we're not unlike them," said Stecher.
The three-way merger between ReliaStar, Aetna Financial Services and ING's existing insurance and benefits operations posed substantial legacy integration difficulties, but the latest technologies have proven up to the task.
"Like in any other merger, the challenge is making it easier to share information and making it easier to take advantage of information," said Paul Donovan, executive vice president of information systems for ING U.S. Worksite Financial Services. "Now, the tools are out there and the technology has come a long way to help."
The merged group realigned into retail (ING Aetna Financial Services) and employer-sponsored (ING U.S. Worksite Financial Services) financial services entities. "We've already consolidated sales offices, we're already sharing in leads, we're already sharing in calls and we're doing a number of cross-sells today," said Donovan. "It truly opened up cross-sell opportunities."
As retiring baby boomers switch from "accumulation mode" to "distribution mode," ING will try to address their changing lives. "Whether it's ING Direct from a banking standpoint, whether it's the retail mutual funds, whether it's annuities, or whether it's life insurance, our goal is to put all of those together as offerings for that particular segment of the market," said Donovan. "Prior to the merger, either Aetna or ReliaStar or ING would not have had those capabilities to offer."
ING will also attempt to anticipate customer needs using market segmentation, predictive modeling and profiling software. "We're doing many things to log and to track all interactions that a client has with us so that we can much more proactively manage that account, to help the participant as well as sell other opportunities," said Donovan. "Today, the information you get from a transaction is actually more important than the transaction itself."
...AND SAVINGS FOR ALL
Although the IFS hub will eventually make it possible for any channel to sell any product, that's not in the immediate game plan for ING Direct. The mass market direct bank recently opened its second ING Cafe in the U.S. (see sidebar), following successful launches in Canada and in several European countries.
"Our overall global positioning is all about integrated financial services," said Arkadi Kuhlmann, president and CEO of ING Direct, Wilmington, Del. "But we've got to do this at the customer level and not at the corporate level."
Kuhlmann presently sees an opportunity to compete for customers on price by hammering away on a "savings" theme. "If you get your first couple of thousand together, you can't seriously tell yourself that you're investing," said Kuhlmann. "We're arguing for the savings step in the ladder for financial wealth."
Accordingly, ING Direct's deposit products are limited to savings accounts and CDs, making the savings concept easier to sell. Loan products are similarly pared back: two fixed-rate mortgage loans, one adjustable-rate mortgage loan, and an unsecured loan product. At the cafe, there are more choices of beverage than banking.
The simplified retail format was easier to assemble than a traditional retail bank. "There are no proprietary systems; they're all bought off the shelf," said Kuhlmann. "It's all 'Lego-built,' so it's plug-and-chug, as we say."
All of the ING Direct outlets worldwide use the PROFILE suite of enterprise banking applications from Sanchez Computer Associates, Malvern, Pa., under a global license agreement signed in 1997. ING Direct USA also relies on outsourcing services from Sanchez subsidiary e-PROFILE, which provides disaster recovery and remote transaction processing from its Pittsburgh data center.
Other systems include EDGE front office software from Information Management Associates, Meriden, Conn. Also, customer profitability measurement and analysis tools from CorePROFIT, West Chester, Pa., help ING Direct to calculate the "embedded value" of its current customer relationships and other performance benchmarks.
So once the IFS hub permits, the high-earning latte-drinkers in the ING Cafe are likely to get referred to someone from the ING Advisors Network, the umbrella organization bringing together several prior acquisitions in the financial planning arena.
"ING Direct is still less than a year old in the U.S.," said Stecher of ING Americas. "As that organization grows, and as we're doing right now with better linkages with our broker-dealer community, we'll have to work out those mechanisms that allow an effective 'warm handoff' to one of our experienced financial advisors."
"It'll be something unique to the U.S. for ING," he said.