Home Banking Interview with Mr. Johan Thijs, Chief Executive Officer of KBC Group

Interview with Mr. Johan Thijs, Chief Executive Officer of KBC Group

by internationalbanker


Mr. Simon Hughes of International Banker travels to Belgium to interview Mr. Johan Thijs, Chief Executive Officer, KBC Group, on the bank’s ongoing digital transformation, the innovation that drives that transformation and KBC’s wider role in society.


Today, International Banker is in Belgium and joined by Johan Thijs, CEO of KBC Group, to discuss the bank’s ongoing digital transformation, the innovation which drives that transformation and KBC’s wider role in society. Really good to be here. Nice to see you.

Pleasure to meet you as well.

Now, you’ve previously described KBC’s digital transformation as an offering which combines human-to-human advice with digital methods and artificial intelligence. What does that actually mean in practice? And do you have any examples to support this statement?

Yes, indeed. Actually, something very, very particular, and it’s driven by, the starting point of everything is the change of customer behavior. What we do see in the outside world is that customers are massively changing their behavior. Which means, they are inspired by what they experience by the Googles and the Facebooks of this world. And they, I mean, they all tend to evolve in the same direction. They expect from financial institutions, like amongst others, KBC, to do exactly the same thing. Now, traditionally, we were organized by bank branches or insurance agencies, but that shift now is happening to service the customer more proactively, and, you know, we prefer also to have digital, a digital approach, as well. Digital applications, like mobile apps and so on and so forth. And that’s what we currently are doing. Now, what is extremely important is that we do see a massive shift in our customers by using the mobile applications. But on the proactive approach, a lot of financial institutions still have to do a lot of work. And now comes the interaction between human, human-human and the machine. Let’s call it AI. Human is obviously the servicing of customers via bank branches or call centers. And machine is, “Let’s try to proactively anticipate what the customer really needs so that we can offer him as of the moment that we approach him, or as of the moment he or she approaches us, the solution which is tailored to his needs.” And in order to do so, the machine will start to interfere with the human being. And then, ultimately, it’s the customer going to decide who is she going to use? The digital channel, or the human channel? Or both? Why not?

But that choice is an important element of that.

I mean, this is the driver. At KBC, we have explicitly chosen to follow the change of customer behavior. So, not the other way around. We are not intending to push our opinion on what the customer should use in terms of our distribution channels. So, in this perspective, it’s indeed the customer who is going to decide.

OK, well, given this kind of increasingly rapid rate of development of banking products and services, how challenging is it to ensure that KBC remains consistently at the forefront of that kind of innovation?

You know, I mean, in terms of offering it to the client and definitely what the customer sees as such, that’s not the challenge. You know, we can launch apps every month if we need to. But that is not the real importance. The real importance is that we as an institution, which is there already for 75 or more years, we have obviously a huge legacy system. And we have to take into account also other elements, like, for instance, regulatory requests and so on and so forth. So, servicing the customer on his, on the front end, on what he or she sees on his device, is the starting point. And the real challenge is not launching the app, but the real challenge is to make that app go straight through our processes in order to create convenience for the ultimate customer. And that is, given the fact that we all have legacy systems, the real, I mean, thereal, real challenge for us as a financial institution. That’s also where we spend the most money, and that is: How are we going to make the experience of the customer super convenient? But at the same time, also take care of the fact that in our processes, we can go straight through—back to back, end to end—to the customer.

And, now, I understand also that KBC’s digital transformation extends to covering its risk-management capabilities. What are the most innovative solutions being devised or already operating in this area?

Where do you want me to start, because we have been doing a lot of stuff? Let me take you, perhaps, also, and what we see today is quite important in the markets, let me take one of the examples, which is quite new. We do it in a very particular way, and it has some great results. And I’m talking about the compliance area. So, the financial industry, obviously, has to take care of a lot of regulation and definitely on the terms of, in terms of, the anti-money-laundering requests, things the bar has been constantly raised. So, also KBC has been investing quite a lot of money into that, not only in the recent past but also in the last 10, 15 years. What we now are doing is to invest more in that domain but no longer via purely human beings—making an analysis of transactions of customers or making analysis on the know-your-customer part. But we are investing massively in artificial intelligence. So, innovative technologies. And in this respect, we have been completely changing the approach, where it was in the past a rule-based approach, into a more holistic view, where we use internal/external data and hereby new technology. And I’m definitely referring to artificial intelligence; it is extremely helpful and extremely powerful. If I look at the results, at the output, of those systems built, then what we can see is that the output delivered by the machine compared to the previous approach is times seven better than what it used to be.

So, a powerful tool in your arsenal.

That’s an understatement.

Now, earlier, you mentioned KBC Mobile. And it has a vast array of services available that enable customers to go beyond banking, including those related to mobility, access-to-service checks, meal and eco checks. Which particular non-banking service in this area do customers seem to value the most?

You know, when we launched that a couple of years ago, we thought, let’s introduce all those elements which go beyond banking or beyond insurance, which have what I call a high-frequency rate. If a customer is using stuff in the outside world on a regular basis, for which he needs to pay, let’s introduce it into our app as an additional service. And—you already mentioned a couple of them in your question—the one they prefer most and which they use most today is anything which is related to public transport. It’s massively used. It goes beyond our expectations. And it’s because of convenience. It’s because of safetiness. I mean, when they pay via the KBC app, they are sure about the transaction. And to give you an example, we have about 150,000 customers who are using this almost every day, which is more than 10 percent of our mobile-banking customers. Now, that’s after three-months’ launch. So, we are in the early stage of the process, and it has massively paid off. And on top of that, we get a lot of sympathy from our customers because of the public systems, which are doing exactly the same thing. If you go to the train station, you have to buy a ticket on the public machines, which most of the time don’t work. But, you know, there’s an alternative, and when the alternative is created, they choose the easiest one and the most convenient one. And that appears to be the KBC app. Now, this is for our customers, but we recently launched, actually a week ago, the same possibility for non-customers. Now, it’s really going to pick up.

Now, you mentioned earlier not forcing things on your customers. And part of your digital transformation places a really heavy focus on developing an omnichannel strategy, which allows the customers themselves to decide how they contact you. Which particular channel are you seeing the greatest levels of kind of increasing customer contact?

You know, mobile has been picking up tremendously. I mean, if you would have asked me five years ago, how much customers and percentage-wise would pick for the mobile channel, probably I would have given you a number which is today completely wrong. Underestimated, at that time. And in this respect, this continues to grow. What is true is that mobile is the preferred channel by customers. But at the same time, and it all depends on the product which they want to be serviced in, they make a switch between all mobile or mobile and human. And with human, you have the different interfaces. You can go to a bank branch. But also you can go to a call center, which we call in our case KBC Live. So, what we see today is that, actually, it’s most of the time for a lot of customers a combination, depending, so a combination of different channels, depending on what type of product or service. For straightforward payments, it’s mobile, clear. For other, more complex products, they prefer to have the mobile transaction guided by, for instance, a call to the call center, KBC Live. So, if you ask me which is the preferred one, I would say it’s mobile, but it’s also mobile and the call center.

Now, we’ve talked about innovation quite a lot. Does it mean something different, then, when applied to KBC’s banking business strategy, vis-à-vis its insurance business strategy?

No, intrinsically, it’s the same. We have the same approach, the same starting position, so it’s about customer servicing, and it’s about paying attention to what the customer wants in a proactive manner. That is for both entities exactly the same, purely 100 percent identical. But the business type is a little bit different. Whereas on the banking side, I call it the aftermath, the after-sale. It’s quasi non-existent, you know. On the insurance side, definitely on the non-life part, the P and C {property and casualty} part, it’s fundamental. So from that perspective, we have a starting position which is the same, but the implicit and the explicit implementation of that is a little bit different on the banking and the insurance side.

Now, during KBC’s digital-transformation journey, which attributes of your digital offerings have you found clients consider the most important? For example, is it speed or simplicity? And if what they consider to be the most important is consistently changing over time, how do you ensure KBC remains sufficiently adaptable to meet those changing needs?

It’s an interesting question. Also, a very difficult one to answer, because I think that it’s evolving over time. I mean, if you were to ask me, you have only one possible answer, I would say, convenience. Now, perhaps that’s, I mean, it’s an easy answer, because it’s actually an umbrella which I have given you as an answer. Because convenience is triggered by what? It can be triggered by speed. It can be triggered by the easiness of your process. It can be triggered by dah dah dah. So, honestly, it’s about convenience. Your customer is triggered sometimes by speed. If he wants to have a mortgage instantly, he needs to get an answer as soon as possible. But sometimes for the same mortgage, it doesn’t matter how fast the answer comes, but the process itself, the hassle which is normally involved in the mortgage process, he doesn’t want to be bothered with that. So, let me be straightforward. What is triggering the customers most is convenience, and I think that answer will be valid for the next coming years as well. And that’s a real challenge for us as a company because we constantly need to balance between what the customer needs, and that need can depend on the type of product he wants to be serviced with. And that’s the ultimate challenge for us.

Now, if I’m not mistaken, for the third year running, you have been voted into the top 10 in the Harvard Business Review top 100 CEOs in the world list. So, I want to say, immediately, many congratulations for that. Secondly, what do you consider to be the most important personal trait in order to be a successful CEO?

You know, first of all, being in that ranking is, indeed, quite an honor, and it’s obviously not my merit. I have 42,000 people which are servicing our customers in a perfect manner. And the output of that, the end result of that, is appreciated, indeed, by the HBR, Harvard Business Review, to be quite good. And in that perspective, I’m ultimately, as the CEO, the one who is featured in the ranking. But not to play it down entirely—obviously, I have a role to play as well. And, you know, for us it’s quite important. The starting position which we have defined as the ultimate strategy of KBC is very simple in its concept. We only, our strategy is only five words. We have introduced simplicity in this perspective into the company, get a clear vision, this is what we’re doing. This is your role as our employee, which we try to give as much empowerment as possible. And this is what we are heading for. And I have to admit, this is particularly my role. I have to admit that our people picked it up quite well. And the end result is that, you know, we’re doing not too badly. So, we have been nominated a couple of times, amongst others, by your magazine as being, as doing well, in certain domains. And the most, and the prize which I liked most was Best Customer Service in Western Europe. Which is the ultimate goal. Obviously, the end results for our shareholders as well in the return they receive, but everything starts with great customer experience. So, in this perspective, yes, it’s the success of KBC Group. It’s triggered by a lot of people. And I’ve played a role in that as well.

And thinking about that kind of empowerment that you’re giving people, back in May 2019, KBC announced the executive committee had started a group-wide internal exercise to further optimize and simplify the governance model at management level and the decision-making processes. For what reason has this been undertaken? And how’s it going?

For us, and definitely also from a personal perspective, I think… we have 42,000 people in this group. We have a lot of smart people. A lot of people who know a lot of stuff. They know the markets, they know the needs of the customers, and so on and so forth. To release that potential, in order to release that, you empower your people. Hierarchy could be the killer game. Hierarchy could be indeed bringing down that creativity, too, because the boss decides, “First you have to pacify me before you can launch that idea”. And, you know, in a certain perspective, I came, together with my management committee, to the conclusion that we have just too much management layers, which is delaying the process. As such, that’s also something which you don’t like. But anyway, what’s far more important is, it also hampers the usage of the creativity and the innovation and then of the spirit of our people and our staff. And in order to get that, to bring that more to the forefront, we said, “Let’s take out another management layer”. Which enables more empowerment. Groups become bigger, which enables more, I mean, streaming through ideas, which enables us to be more effective in servicing customers better. And for that reason, we introduced it in May. Now, the next step was immediately set in September, because we are now driving that through the whole organization. So, it’s not only stopping at management layers; it’s stopping actually at all leadership levels across the group.

And also in September, along with several other leading banks, KBC signed the Collective Commitment to Climate Action, an initiative of the United Nations’ Environment Programme Finance Initiative. What impact is this initiative expected to have? And looking forward, what do you consider to be the single most important action that KBC and the banking industry in general can take to reduce the impact of climate change?

You know, when we talk about the disruption ongoing in the financial industry, most of the time, people speak about the digital impact, you know, and then also obviously they refer to the fintechs, or they refer to the big techs, which is all true. I would add one particular element next to those as well, and that is, indeed, disruption created by what you just described in your question. Amongst others, the environmental impact and the role we have to play into that. I think this is the next big thing. And with next, I mean today. It’s already happening. If I look at what is currently in the pipeline of a lot of regulatory institutions, amongst others the European Commission, then, indeed, we as banks have a role to play. I think that most of the time, they also look at the banks to actually help implement—regulators, supervisors—that kind of solutions to the issue, for instance, climate change as well. That’s one side. The other side, I think that we as financial institutions have indeed a role to play. We have a role to play in society. We have a role to play in all those elements that influence that society. And one of them is the environmental impact. As a financial institution, granting a lot of loans and billions of billions of loans, we can indeed influence that impact by considering whom we are granting a loan to. And, you know, I consider this to be a societal role for an institution like ours. And for that reason, KBC has not only signed those agreements but also is implementing them already for many, many years in our institution. And we will be, you know, indeed on the forefront of the implementation of all those, all those new ways of thinking.

Now, we’ve talked about KBC’s wider role in society and, in particular, climate change, for example. Also, beyond banking. But the group states it’s involved through initiatives relating to entrepreneurship as well. Which initiatives are these specifically?

You know, when the group was founded, let’s say, 100 years ago, the, actually, the people who did that were entrepreneurs. And, so, those elements, these are the real roots of our group. And when we started to think 10 years ago, or, what, eight, nine years ago, about how can we play an important role in our society, we actually just went back to our roots. That is, let’s foster and let’s stimulate that entrepreneurship in all the countries where we are present. We started in Flanders, but we’re now obviously building that in all the countries where we currently are present. And in concreto, what it means is, we started up an initiative, and we use the name in every country where we are active, which is called Start it @ KBC. Which means that KBC facilitates youngsters, entrepreneurs, people with a bright idea on a product, on a service which they want to develop. But, I mean, they’re bothered with all of the hassle around it: the accounting part, the IT part, the, you name it, administrative part. And that particular part we take out of their hands. So, they can keep themselves, with all of their energy, busy in developing their ideas around the new product which they want to bring to the market. Now, with those facilities created, we take into account not only financially but also organization-wide. And that’s what we have established group-wide. Next to that, we have, meanwhile, facilitated all the other elements which are necessary to make the next step. I’ll give you two examples. We have created KBC Vendor, which is a kind of Tinder of KBC, where entrepreneurs with bright ideas which could help other entrepreneurs can actually come to a platform and say, “Listen, I have a solution for you. Who is interested? Let me know. I will share my ideas on how you as an entrepreneur can make the next step.” And then the last one, I call it, it’s called KBC Match. They call it the dating site of KBC, where we bring together entrepreneurs who have a current activity, who want for one or another reason—for instance, they have no successors—to sell that company but don’t have the immediate partner in the near environment. We created a platform where they can bring that proposal on the table. We will assess all our entrepreneurs of the entrepreneur community to see if they are interested. And we bring them together, and then they can potentially do a deal. So, this is all facilitating from the origination till the very end, and everything in between, things which are related to entrepreneurship.

So, it’s very people-focused. And thinking about the kind of skills and training, how do you ensure that the training you offer your folks remains up to date, especially so they can deal competently with the kind of ever-changing technology that they’re facing?

That’s a huge challenge. And that’s, I mean, it’s a very, very, very difficult one as well. I think intrinsically, we have plenty of skills in our community, but not necessarily the same skills which you need to be future-proven in the area that you are currently working in within the company. So, we have a double challenge. The first one is with the people which we have, with the skills which we need to have tomorrow, how can we match them? And if they are not matching, how can we train those people in order to make them indeed future-proof with their skills? And if they’re not available in the company, where can we find them out there, outside the company? Now, what we currently are doing is, indeed, to create what I just said into kind of a platform where you bring into account all the skills people have. Also, the skills we don’t know. So, you have the possibility of entering their own skills into the system. We knew, or we know better, what we are going to need in the near future, what kind of skills you need to have to do Job X in, let me say something, five years. And then we have a fully AI-driven platform, which brings the two together. People with skills, which need a little bit more training, will be triggered by the system in order to follow trainings, which we then provide to them. Either ourselves, either by universities or whatever it takes. And then last but not least, if we then indeed come to the conclusion, we don’t find them, the same application is able to go via our external systems to look on the outside market. But, this, everything combined, is a huge challenge. And not only for financial institutions. I think for the market as a whole. For the next five to ten years.

Now, with more and more forecasts of a continued economic slowdown, or even perhaps a recession, here in the eurozone, how much of a concern is this to you? And would you say that KBC is adequately prepared for such a scenario?

Yeah, you know, we have a lot of challenges. We have, indeed, been talking so far amongst others about digitization and the impact of customers on our business model. But I think, indeed, the intrinsic underlying drivers which are crucial for a financial institution—amongst others, the interest rates, the financial markets as a whole—have a big impact. And, last but not least, economic growth is in that perspective, indeed, a very important parameter. So far, and I think also going forward and as I said in the nearby future, up so far, we have been doing great, and that is something which we can continue to do. But it goes without saying that the current interest-rate environment is indeed having an impact on and putting pressure on our results. KBC has been always performing in the high teens, ROEs, but given the circumstances, that is today a real challenge. On top of that, I would add also that obviously because of the, I mean, further evolution of the ECB and the further evolution of regulation—that in itself, I’m not saying not for good reason on the contrary, is having an impact on financial institutions as well. But if, if all of that is combined, personally, and I can speak for KBC but will not speak about financial institutions in general, we are very well prepared to face the challenges of the future. And, obviously, I hope also that supervisors continue to do what they have been doing in a very balanced way, taking into account you have supervision, you have regulation, but you have also to build your future as well.

And, finally, what do you consider to be KBC’s biggest priority in 2020?

The major priority—I would put forward that it is to constantly anticipate changing customer behavior. Now, it is easy said, but it is a huge challenge because it entails all the different elements which we are confronted with. It means, indeed, what does a customer need, how do you anticipate that? Others are dealing with that as well, and others do not necessarily need to be the incumbents. I am talking about now the fintechs. But I’m definitely talking about the big techs, which are doing exactly the same thing and which are looking more and more to what we in the financial industry are doing. For instance, payment services. That eat part of our profit there. And so on and so forth. So, that’s part of that as well. But the change in customer behavior has an immediate impact on the way we are organized. As such it has nothing to do with pure, I mean, pure profit generation in sales. It has to do with the way we are organized. Straight-through processing in that perspective is something which is of utmost importance, and that is a challenge for all the incumbents in the financial industry. And if you put it all together, I would say, “Listen. Anticipating the change of customer behavior going forward is the big impact, is the most important part. And it entails a lot of things which you do not see at the surface.”

Well, thank you very much for your time today.

It’s a great pleasure.


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