Would You Like a Mortgage With Your Mocha?

Who says banking has to be dull? Not the executives at ING Direct, who are banking on powerful technology and clever marketing to make a radical change in an industry that needs it. The result: In less than three years, they’ve attracted more than a million customers and $10 billion in assets. And they serve a pretty mean cappuccino.

There’s no mistaking the First Bank of the United States in downtown Philadelphia. It looks the way a bank is supposed to look: solid, with tall Corinthian columns shouldering a weighty triangular pediment. Chartered by Congress in 1791, each marble and mahogany piece of the building is designed to convey a sense of security, authority, reliability, and power.


A few blocks down Walnut Street is a storefront that no one would confuse with a traditional bank. The facade is made of glass. Inside, a bright-orange mountain bike hangs from the ceiling. Wall-mounted plasma screens are tuned to ESPN. There are café tables and Internet stations — and not a column in sight.

Memo to banking’s old guard: Meet the new guard — and have a chai latte. This place, one of three cafés operated by ING Direct, may be a sign of things to come in one of America’s most conservative industries. There are no uptight bankers behind heavy desks — only baristas who are as happy to talk about last night’s Sixers score as they are about a home-equity loan. The café is open on Saturday nights and Sunday afternoons, so you can enjoy a biscotti while you check on your savings.

Everything about the place defies expectations — which is a big part of ING Direct’s strategy, says president and CEO Arkadi Kuhlmann. “You have to shock people a little bit to get them to think differently about how they manage their money,” he says. “The design of the cafés tells people that what they’ve come to expect from their bank isn’t what we deliver. We’re going to be simple and easy and human.”

ING Direct’s products are straightforward: mortgages and home-equity loans, a half-dozen mutual funds, and CDs and savings accounts that pay some of the highest rates available. There are no fees or minimums. Customers can manage their accounts online, by phone, or by mail. The cafés, in Philadelphia and New York and soon to open in Los Angeles, introduce new customers to ING Direct, give current and prospective clients a place to hang out — and taunt competing banks.

In just two-and-a-half years, ING Direct has attracted more than a million customers and $10 billion in assets, shifting from startup mode to being one of the 50 biggest banks in the country. New assets are streaming in at a rate of close to $500 million a month. ING Direct, based in Wilmington, Delaware (but a division of the Amsterdam-based ING Group), had expected to lose $37 million in 2002. Instead, it turned a profit of $40 million.

For Kuhlmann and his 600 employees, the numbers show that they’ve made a strong start toward “leading America back to saving,” after the late-1990s infatuation with a booming stock market. But only a start. “This industry is not strong in terms of customer appreciation,” Kuhlmann says. Asked whether that means that banks don’t appreciate customers or that customers don’t appreciate their banks, he nods and smiles: “Yes.”



ING Direct’s headquarters is located in a restored furniture-storage warehouse in downtown Wilmington, where its rambunctious approach to banking is being felt even more keenly than in Philadelphia. The company is doing a lot at its home base. Instead of building its own office tower, it has chosen to invest in reinvigorating the area around Wilmington’s run-down train station. This summer, part of the company will move into a renovated Pennsylvania Railroad building wedged between the train station and the Christina River. ING Direct has been working with the city to connect its new building to the station by closing a street and erecting a glass atrium full of shops, restaurants, and an ING Direct Café. The company is also advocating a redo of the train station itself.

For all of what ING is doing, a big part of its success stems from the things that it doesn’t do that allow it to deliver high interest rates and serve up radically simplified loans. It doesn’t have an ATM network or traditional bricks-and-mortar branches. It doesn’t do outbound telemarketing or force customers to talk to a computer before they can talk to a service rep.

What the company does do — enthusiastically — is invest in technology and marketing. At any given moment, the odds are good that a project is under way to keep improving the ING Direct Web site, such as the development of a feature that tracks all of the steps involved in applying for a mortgage — information that will render many phone calls irrelevant.

And one-third of the company’s operating budget goes to marketing, according to Kuhlmann. But the marketing is concentrated on programs — direct mail, Web ads, some TV — that get customers at the lowest cost. “It’s not unusual for a bank to pay $300 or $400 to acquire a customer,” says Dave Lewis, ING Direct’s chief marketing officer. “We’re below $100.” Close to 40% of all new accounts are generated by word of mouth, either through “bounty” programs or simply through one customer telling another about this out-of-the-ordinary bank.

ING Direct’s intention isn’t to replace local banks: An ING Direct account is supplementary by nature, since there isn’t the option of writing checks or pulling cash from an ATM. “I want you to have the expectation of take-out food, not of full service,” Kuhlmann says. A customer who calls the 800 number multiple times a day to make balance inquiries spoils the business model for everyone else. “We’re not afraid to close accounts on philosophic and economic principles,” Kuhlmann adds.


There’s no denying the meteoric growth of ING Direct since its launch in September 2000. How has the operation managed to come so far so fast? One answer involves the company’s distinctive personality: its face to the customer.


“Look at an airline such as Southwest,” says Kuhlmann. “People like them because they make it easy to fly. They also make you feel as if they’re on your side by cracking jokes and not wearing standard uniforms. We’re trying to do that with banking. We want to make people feel proud about saving their money — even make them feel that it’s a cool thing to do.”

Another factor behind ING Direct’s growth is its commitment to selling. Jim Kelly, ING Direct’s executive VP of sales, says that it was a deliberate choice to avoid calling the people who answer the toll-free number at ING Direct “customer-service reps.” Instead, they’re called “sales associates.” “We wear it on our sleeves, and we want everyone to understand that sales is at the core of what we do,” says Kelly. Sales associates set up new accounts, serve up information to existing customers, and focus on the “smart sell”: bringing in customer assets from other bank accounts and, ideally, helping them earn better returns.

I pull up a chair, don a headset, and listen to incoming calls taken by Aniello Maglione, one of ING Direct’s top sales associates. The first caller, Myrna from New York, wants to close her account because she isn’t in a position to save right now. “I’ve been there myself,” Maglione empathizes. He persuades Myrna to keep a few bucks in her savings account while he transfers most of the money to her local bank’s checking account. “When you have money, you can put it in,” he says. Before hanging up, he and Myrna chat about an auto-withdrawal program that can help her save.

The next caller is Carmine from New Jersey. He’s looking to move $1,500 from his ING Direct savings account into his local checking account. Maglione points out that the interest rate for ING Direct savings accounts is now at 2.22% and recommends that Carmine put a portion of his money into CDs. “Are you familiar with the laddering concept?” he asks. It’s a plan to put equal amounts of money into one-, two-, three-, four-, and five-year CDs in order to earn a higher average interest rate. Carmine sounds confused. “I’m 66 years old, Aniello,” he says in protest. “You’re a young guy!” Maglione shoots back. He tries a few ways to get Carmine into laddering, but Carmine demurs.

Sales associates collect points toward a bonus by signing up customers for automatic-savings plans (the sort that Maglione discussed with Myrna), getting them to open new accounts, or helping initiate mortgages. On this particular Thursday, ING Direct’s sales associates will handle 4,737 calls — all of them without a script. “We want to hire people who have a winning attitude, who are hungry and independent,” says Kelly. “You don’t get those kinds of people if you ask them to read from a script.”

One important objective at ING Direct is to answer at least 80% of calls within 20 seconds. Chief marketing officer Lewis points out that the incentive pay of everyone in the company is tied to the 20-second goal, which, for example, discourages the marketing team from launching campaigns that generate more phone inquiries than the company can handle. “You need to have the right resources without killing the cost model,” Kuhlmann says, “and that’s a daily struggle.”


Indeed, one big worry at ING Direct is that the company will get too big too fast. “If we kept the juice on,” Kuhlmann says, “we’d be running at a billion dollars a month in new assets. But we couldn’t process that. We couldn’t invest that or answer the phones fast enough.”


On the fourth floor of the headquarters building — known as the Pakhuis, Dutch for “warehouse” and pronounced “pack house” — it’s time for the 9 AM marketing-update meeting. “We’re going through a shift right now,” explains Chris Williams, vice president of brand strategy. “Our early customers were people who understood the value of saving. Now we’re going after people who need to be educated.”

There’s a circle of 15 chairs by the windows, away from the honeycomb of cubicles. The meeting starts out with show-and-tell: a new piece of direct mail, the ads that will soon dominate every inch of available advertising space in Boston’s South Station, an artist’s rendition of what the ING Direct building in Los Angeles will look like once it is “wrapped” in orange for the opening of the first West Coast café.

There’s some discussion about how to handle banks that are offering slightly higher rates than ING Direct — such as Nova Savings Bank, which was advertising .01% higher interest on a one-year CD with a $500 minimum deposit. “There’s definitely a ‘What have you done for me lately?’ feeling among customers,” says Williams. “But we can make the point that we have the number-one rate [on average] for the year.”

There are also the inevitable snafus: When the meeting took place, a test program to encourage financial advisers to open 25,000 new ING Direct savings accounts for their customers was falling 3,000 accounts short of its goal for 2002. (By the end of December, though, the goal was surpassed by 500 accounts.) Otherwise, ING Direct executives say that they are exceeding their five high-level targets: total assets; operating expenses as a percentage of assets; call-center service level; net number of savings accounts opened; and number of other accounts opened, such as CDs or mortgages.

That will free up the team to work on new initiatives. The E-First program will nudge customers toward receiving all of their correspondence electronically, from tax statements to mortgage correspondence. A plan is under consideration to offer term life insurance, fixed annuities, and title insurance for mortgage holders. Finally, there’s a project that aims to “reengineer home mortgages so that they’re cheaper and simpler,” according to Kuhlmann. “You shouldn’t have to buy a book to learn how to borrow money for your house.”


Kuhlmann’s intention is to keep chiseling away at the industry’s engraved-in-marble assumptions about how banking works. “You can’t do meaningful things without passion and a powerful idea about what you’re trying to do,” he says.

But Kuhlmann is also aware that at some point, he’ll have to put down the chisel and let ING Direct stabilize, focusing on consistency rather than on radical change. “The question we’ll want to ask is, Did the ING Direct wave in the marketplace create some trends and changes that left people better off than they were before?” Kuhlmann says. “If the answer is yes, and we did manage to push the envelope, then everyone here will carry that success with them for a long time.”

Sidebar: Banking on the Web

Plenty of banks have tried to turn the Web into a channel that works. Too often, they have ended up with sites that were too complex — the digital equivalent of standing in line at a branch. ING Direct’s Web site tries to make opening a savings account, checking balances, and transferring money “as easy as using an ATM,” president and CEO Arkadi Kuhlmann says. There are three core principles.

Keep it clean. “There’s always a temptation to add stuff to the Web site, to load on the features,” Kuhlmann says. The Web team at ING Direct resists that urge. There are no menus that pop out from behind things, no animated flash movies.

Cheaper is better. ING Direct also resists adding a “chat now” button that would link customers to the call center. Why? “Our cost model doesn’t accommodate that,” CTO Rudy Wolfs says. “It’s a huge investment to train reps to be typists and to make sure that they respond quickly enough.” This year, the company launched a modest test of a chat application in one area of the site, where it has found that users sometimes get stuck in the process of applying for a home-equity loan. If it works, ING Direct may try chatting with users elsewhere on the site.

Numbers don’t lie. Internally, ING Direct tries to measure every aspect of its Web site: how long it takes reps to respond to customer emails, how long it takes each page to be sent to a user’s computer, and how often users give up in the middle of a process. “Tracking stats lets you solve small problems before they turn into major problems,” says Mike Florax, who oversees ING Direct’s command center.


Scott Kirsner ( is a Fast Company contributing editor based in Boston. Learn more about ING Direct on the Web (