By John Manning, International Banker
Despite achieving a laudable position among Europe’s very best performing and most reputable financial institutions, three years ago Belgium’s KBC Group decided that it was time to implement a comprehensive, group-wide digital strategy—one that seeks not only to look to the future but shape it as well. A decisive move indeed, but one that also appears to be paying off handsomely….
“Try it. Experience it.” That’s the way Johan Thijs, the hugely successful chief executive officer of KBC Group, recently described the Digital First transformation that his organisation—and Europe’s premier bank-insurer—is currently undergoing. But behind this succinct motto lies a deeply compelling metamorphosis that seeks to anticipate not only the changing nature of its clients’ needs, but also the kind of digital world that much of the global banking sector has been gradually constructing over the last few years. And judging by the evidence to date, KBC’s own contribution to this brave new world places it firmly at the forefront of the digital-banking revolution.
For a banking giant such as KBC—one that consistently posts profits that are among the verystrongest in the European market, and one that is always highly liquid and well-capitalised—it may not have been the most obvious or pressing decision in the world to embark on such a journey, especially given the clear leadership position it had attained under its prevailing business model. Indeed, the proverb “If it ain’t broke, don’t fix it” immediately springs to mind; moreover, attempting to convince the Group’s 42,000-strong employee base that their winning business model must be significantly enhanced could not have been the easiest of tasks.
Nevertheless, KBC and Mr Thijs persisted….
In 2017, the Group announced a three-year, €1.5-billion investment programme for innovation and digital transformation. Scheduled to be completed by the end of 2020, the transformation charts KBC’s journey towards a digital-first, customer-centric financial institution, while continuing to retain its unique banking-and-insurance business model.
The evidence of this digital-first approach can’t be witnessed more clearly than through its operations in Ireland. Indeed, having recently made the country one of its six core markets—along with Belgium, the Czech Republic, Bulgaria, Slovakia and Hungary—the Group decided that KBC Bank Ireland would be the frontrunner of the digital transformation, in terms of introducing new innovations and sharing them with the rest of the Group. A KBC Innovation Hub was built in Dublin for this very purpose, representing the starting point for the introduction and testing of digital solutions for customers in Ireland. Some of these innovations may be adapted and rolled out across KBC’s other markets.
For instance, September 2017 saw KBC Bank Ireland launch its revolutionary new mobile-banking app. Designed for new customers, the app was the first of its kind when launched, enabling bank accounts to be opened, activated and used at any time, within just five minutes. As such, much of the hassle and paperwork traditionally associated with opening a new bank account was effectively eliminated by the app-based solution. And not only that, a welcome gift of €5 awaited every new current-account holder after his or her account had been opened.
The mobile app is just one of a series of cutting-edge innovations that have emerged from KBC Bank Ireland during the last couple of years, many of which are now considered to be market-leading products and services. Last year’s introduction of an app-based instant-replacement service for lost or stolen cards is a prime example, whereby customers can immediately block these cards as well as apply for and receive instant digital-card replacements via the app. And last year, the bank also became the first in Ireland to launch Garmin Pay for its local customers, meaning that KBC is the only bank in the country to offer digital wallets from four of the world’s leading technology companies: Apple Pay, Google Pay, Fitbit Pay and now Garmin Pay. Such trailblazing activity clearly indicates KBC’s commitment to adapting banking in direct response to its customers’ preferences for more convenient digital solutions.
But although KBC Ireland has emerged as the de facto leader of the digital journey, the Group’s other core markets are hardly lagging behind. Far from it—solutions are being optimized very carefully in various countries as per customer preferences. Take Belgium, the Group’s home market, as an example. In March 2018, KBC announced that its mobile-banking app KBC Mobile was to become the first operational “multi-banking” app on the Belgian market. This means it is the first app to be officially in compliance with the Payment Services Directive 2 (PSD2) rules that have been in place since January 13, 2018, requiring all European banks to make current accounts and details of these accounts available to authorised third parties—banking and non-banking—at the client’s request.
KBC Mobile, therefore, allows customers to check their balances or make transfers to and from accounts they hold with other banks, either via a direct API (application programming interface) connection between KBC and the other bank, or if API is unavailable, then via a direct link to the other bank’s online application, in accordance with PSD2 regulations. “So that means that we are now the only bank in Belgium which has an app which is fully PSD2-compliant,” Mr Thijs observes. “You don’t have to leave the KBC app if you have several accounts with other banks after downloading our solution.”
Nor have the digital solutions that have been rolled out to date been conceived in some isolated laboratory, away from public scrutiny. On the contrary, many of the products and services have been first tested on those who matter most—the customers themselves—in order to gauge responses and make enhancements as necessary. The recent decision to allow a thousand KBC customers to be the first people in Belgium to trial an innovative solution of making contactless payments with “wearables” aptly illustrates this strategy. Wearables are fashion accessories such as rings, watches and bracelets that have built-in chips that use the same near-field communication (NFC) technology as contactless payment cards. The trial, which ran through December, provided crucial feedback to KBC to aid in future development of this groundbreaking way to make payments.
While the digital journey has undoubtedly taken KBC into unchartered territory with the introduction of such state-of-the-art innovations, the Group has nonetheless solidly relied on a familiar, enduring and successful foundational strategy, one that has served it well throughout the years and has been pivotal in elevating it to the enviable position it holds today as one of Europe’s true financial powerhouses. This strategy continues to focus on maximising customer satisfaction, particularly by seamlessly distributing products and services via a range of channels, as well as consolidating its unique, integrated bank-insurance model within its core countries. But arguably it has been KBC’s long-admired internal culture from which the Digital First strategy has drawn the most strength. The Group’s well-known acronym PEARL—which has been in place since 2012 and stands for Performance, Empowerment, Accountability, Responsiveness and Local Embeddedness—typifies this culture and plays a profoundly crucial role in guiding the digital journey. Mr Thijs stresses just how important adopting the PEARL mindset throughout the entire organisation has been, particularly with regards to:
- Responsiveness: “The translation of responsiveness is you proactively anticipate for the fulfilment of customer needs. So, you have to anticipate customers’ changing behaviour. And PEARL intrinsically says, ‘Adjust your way of thinking, and if need be, adapt or adopt new ways of thinking.’”
- Empowerment: “This means empowerment for all 42,000 people out there who are part of the KBC organisation. It’s not only a personal task, but you are allowed to anticipate that and help us understand what we have to do. So, you are empowered to provide the solution, which is happening big time in our group.”
Indeed, Mr Thijs attributes much of KBC’s recent success in developing a blockchain solution to PEARL. One of the most discussed and highly anticipated technologies of the last few years, blockchain continues to be viewed as a major disruptive force on the global banking sector. And KBC certainly recognises this disruptive potential; in 2017, the bank became one of seven founding members of a blockchain consortium containing some of the world’s most prestigious names in global banking. The lenders joined forces to create a new, groundbreaking blockchain-powered platform that makes domestic and cross-border commerce easier for European companies, especially small and medium-sized enterprises (SMEs). Initially called Digital Trade Chain (DTC) before re-branding to we.trade, the platform simplifies trade-finance processes for SMEs by addressing the challenges of managing, tracking and securing domestic and international trade transactions. And on July 3, 2018, the first live trades on the we.trade platform were confirmed, marking the first commercially viable, open account trades harnessing blockchain technology.
Developed with the support of IBM (and, in fact, using the IBM Cloud), distributed-ledger technology and smart contracts are just a couple of the cutting-edge innovations being implemented by the platform. And Mr Thijs is keen to highlight the contribution of the PEARL ethos in initially helping to cultivate we.trade. “That solution was developed by one of my employees somewhere in my organization because he was empowered to do so. He just came up and said, ‘I have an idea. I don’t know if it works, but what would happen if we would do this?’ And we started working on this, and it became we.trade, which is now a solution which is used by 24 banks. And that’s PEARL at its best even in a digital environment.”
Along with PEARL, the Group recognises the paramount importance of teamwork across its vast geographical presence. Team-building exercises are heavily encouraged at KBC, especially as a way to ensure that good ideas and experiences can be shared not just within business units or the specific countries in which KBC operates but also across borders and thus seamlessly throughout the entire Group. Indeed, given the often drastic changes that have resulted from digitalisation, having this Group-wide commonality is proving critical to an institution as large and diverse as KBC, and it ensures that it can still remain locally embedded to its customers.
The overarching KBC family name Team Blue has, therefore, been created to represent this spirit of unity, blue being the logo colour under which the Group’s units in all countries operate. According to Mr Thijs, Team Blue gives employees “a feeling of being part of a big family regardless of the brand, regardless of the region and regardless of the culture of the local entity. We are part of Team Blue, which allows to copy things, to distribute things, within the Group. Because it’s built by Team Blue. It doesn’t matter which country it is built in. And that makes it to become quite strong.”
Last year, the KBC chief executive handed Team Blue a specific challenge, precisely as a way to instil a bond among the 42,000-large KBC family. “Aim for the Moon” challenged the team to achieve at least 384,000 kilometres (the distance to the Moon) by organising sports activities (such as walking, swimming and cycling) with staff members, friends and family. By then converting the total kilometres covered into euros, donations were made to various charities. In total, 770,867 kilometres were clocked up, equivalent to the distance to and from the Moon, thus generating more than half a million euros for various good causes. “People are so proud to be part of Team Blue that whatever we do, as long as it’s Team Blue, they’re fine,” Mr Thijs proudly declares.
So, has the transformation been worth it so far?
The evidence strongly suggests so; in fact, there’s little to suggest that it has been anything other than a roaring success. An external assessment by D-Rating, an independent agency that rates digital performance, for instance, was carried out on 15 retail banks in Belgium between June and August of last year. Based on 429 indicators measuring the digitization of banks’ offerings, the efficiency of contact channels and the performance of customer journeys, KBC was ranked as the best-performing traditional bank in Belgium.
As acknowledged by the company itself, “N26, the German neo-bank, is leading the panel, but with a limited product offering today. Very close behind, with a full range of services, KBC/CBC (a Belgian subsidiary of the Group) is dominating the traditional and online banks. KBC/CBC offers a very wide range of features, a large share of products can be acquired fully online, and their journeys are efficient.”
Internally, meanwhile, the numbers strongly justify KBC’s transition towards the digital realm. The number of digital-wallet transactions using Apple Pay, Android Pay or Fitbit Pay and linked to a KBC current account rose by 75 percent year-on-year in 2017. And the value of customers’ transactions also surged by a massive 82 percent year-on-year. Impressive figures, indeed.
And KBC is also enjoying the fruits of previous efforts to cultivate a more entrepreneurial spirit within its walls. Back in 2012, it launched Start it @ KBC, an incubator that fosters bright ideas and encourages budding entrepreneurs to work out their ideas and explore further business opportunities. And in this current digital era, Start it @ KBC has experienced flourishing activity from the thriving fintech sector. “We have 600 people with ideas working there, who’ve established their own companies and who want to make it come from a start-up to a true-life, resilient, viable company,” observes Mr Thijs. “Amongst those, we also see real fintechs.” In turn, this is presenting opportunities for KBC to potentially join forces with exciting start-ups to deliver innovation to its customers. “If it is indeed a solution which can be used as a service for our customers, then definitely we ask to work together.”
Although such evidence provides a glowing appraisal of KBC’s digital endeavours, the Group’s chief executive is under no illusions regarding the challenges that lie ahead. As Mr Thijs recently explained, much of the focus remains on “redesigning” many of the Group’s internal processes as well as the breadth of offerings that are available to customers. And the underlying complexity of the process is being taken out of the equation—if a digital option is feasible, it will seemingly be offered to the customer. Product sales and product development, therefore, are being reimagined as if offerings could be sold only by digital means, which is fundamentally changing the Group’s thought process. “Nowadays, we’re selling mortgages through our, mobile applications and through our website as if it was a simple product. And it’s just how you design it,” Mr Thijs observes. “Complexity is a very difficult-to-grasp word and very difficult-to-grasp meaning, but sometimes our understanding of complexity is something which we have been used to for the last 75 years. But if you reconsider how you have to design a product, then all of a sudden for the customer it starts to become easy.”
Throughout the digital transformation thus far, that dedication towards making it easy for the customer has been abundantly clear. Optimising the client experience is of utmost priority, such that he/she will be able to smoothly experience an offering potentially through a variety of distribution channels. “If you sell it through your bank branches, or through your call centres web banking or mobile apps, then the customer’s delighted,” Mr Thijs explains, “because it’s smooth, it’s easy, it’s fast. It’s easy to understand…. We have a fully integrated distribution model. That means that any way you buy it, you will always have the same experience in terms of delivery to the customer.”
But ultimately, the Group seeks to go beyond providing solutions for traditional banking. “What we are currently doing is just the beginning,” Mr Thijs warns. So, what, exactly, is still to come? “Ultimately, we’ll see where it ends, but perhaps tomorrow we will become part of a platform where everything together is combined. We are integrating a lot of services which are non-traditional banking, and there is no deadline for achieving what we are doing, because I think it’s open-ended.”
And that is perhaps the most fascinating aspect of this whole transformation. Although officially the journey is scheduled to be completed in 2020, KBC’s commitment to achieving the best digital solutions for its customers will remain an ongoing process. “What we have in mind is that all of our processes in our bank branches, in our mobile applications, call centres, websites, that the interactions between those channels should move 100 percent smoothly. We are there for some of our products, but we’re not yet for all.” Mr Thijs sees an entire ecosystem on the horizon as being conceivable, one that is smoother, more integrated and more seamless than ever before.
If such an ecosystem comes to fruition—and given KBC’s stellar track record in recent years, there is little to suggest that it won’t—then exciting times lie ahead for both KBC and its customers.