One man’s mission to
get you to save money
T THIS TIME a decade ago, a large
but relatively unknown Dutch-based
company, ING, was weighing whether its successful online savings
bank in Canada could work in a much bigger market, the United States. ING faced
two daunting obstacles: People were leery of
dot-coms after the big bust in 2000, and saving money seemed like a quaint, anachronistic idea at a time when major banks were
heavily promoting spending, usually with
their credit cards.
But ING Direct, approaching its 10th
birthday, has succeeded, perhaps beyond the
most optimistic expectations. With some 7. 6
million customers and nearly $90 billion in
assets, it is the largest online direct bank and
the largest thrift in the U.S. The company,
based in Wilmington, Delaware, prides itself
on being an anti-bank—no physical branches—just a Web site, a network of call centers and seven ING cafés where customers sip
coffee and do their ING banking.
ING Direct started out by offering basic
savings accounts and gradually added checking plans, home loans and investment plans
(Two ShareBuilder programs by ING Direct
are available for Costco members. Go to
Costco.com and click on “Services” for more
information.) It succeeds by keeping costs
low and offering service meant to assure customers that their banking needs can be met
without actually seeing a bank teller.
Leading the company is CEO Arkadi
Kuhlmann, a Harley-riding, palm-reading
Canadian known as “the rebel banker” because,
unlike traditional banks, his company disdains
fees and heavily promotes savings (the latter
has earned Kuhlmann another moniker, “the
CEO of Savings”). His philosophy is to treat
banking like a retail business, focusing on saving customers time and money.
Kuhlmann had a career in traditional
banking before joining ING Direct. He worked
for the Institute of Canadian Bankers and the
Royal Bank of Canada, and also was CEO of
Deak International, a foreign exchange and
precious metals company, before being hired
to launch ING Direct in Canada.
DAVE MOSER PHOTOGRAPHY
The Connection asked Costco member
Kuhlmann about the challenges facing consumers and the banking industry as the new
decade begins, why people should save more
and what lessons his innovative company
might offer for anybody running a business.
The Costco Connection: It’s approaching a decade since ING Direct launched in the
United States. What are the new challenges your
company faces today?
Arkadi Kuhlmann: One new challenge
today is that the federal government, through
Fannie Mae and Freddie Mac, is heavily involved in the mortgage business to try to keep
people in homes. These federal programs [let
people get or keep] mortgages with no equity
down. That challenges us because we sell
mortgages, and that market is getting smaller
Also, a lot of people are copying our advertising, our colors and what we say. So we have
to continue to reinvent ourselves. Much like
Costco, ING Direct has to keep finding ways to
be more efficient and use technology to get our
costs down so we can continue to offer a good
value to our customers.
FEBRUARY 2010 ;e Costco Connection 23
CC: It’s been a tough couple of years for
banks. Many either failed or needed government bailouts. Your thoughts on where all those
banks went wrong—and how ING Direct
avoided the mess.
AK: It’s been a big financial crisis. A lot of
the banks got caught up with pushing a lot of
credit, which is all about growth and keeping
the consumer buying. They reduced lending
standards, such as not requiring equity in
homes. People basically got a bit overextended. The banks pushed too much credit,
but people also felt overconfident and took on
too much credit.
ING Direct by its principle is always
about leading Americans back to savings. So
in the midst of this for the past nine years we
have been building our business model of
encouraging Americans to save for a rainy
day and to save to be a bit independent. Our
approach is that we can save you money, save
you time. That has made us always more cautious on extending credit or giving mortgages,
which we would only do with equity—for
example, in a home. We always very strongly
encourage consumers to balance their financial affairs.
We’ve grown to $90 billion in nine years
and 7. 6 million customers—that’s about 100,000
new customers a month—basically on the
platform of being savers. A lot of people are
attracted to our simple products as a simple
way of saving time and saving money. Our
business is a bit self-selecting that way.