ING Direct
1. Understand ING Direct's competitive strategy within the banking industry. Also describe factors attributed to ING Direct's success.
Focused Product Strategy: ING Direct targets affluent customers by offering simple products, no or low fees, high returns on deposits, and service via call centers, the internet and mail. ING Direct offers predominantly savings accounts in all countries; in some countries it also offers products like: term deposits, consumer loans, mortgages, life insurance, brokerage and a few selected mutual funds.
Very competitive cost structure: ING Direct considers Fidelity and other asset managers as their peers, specifically in terms expense-to-asset ratio. At maximum 40 basis points, this is at least two percent lower than that at a traditional branch-bank, which typically operates at around two-and-a-half percent. ING Direct even expects their ration to go lower to somewhere around thirty basis points in 2006.
Staying away from branch-delivery: ING Direct does not offer traditional checking/current accounts, which are usually used to pay monthly bills and buy goods in stores. These accounts have a large number of transactions each month, naturally requiring a physical branch to service customers' needs. For these types of account, ING Direct points its customers to their local banks. By encouraging customers to use low cost channels such as the internet or telephone, ING Direct managed to keep their cost really low.
Low fees, few requirements and simple rules: The problem with many traditional banks is that they move a lot of their income into the fee structure. Customers tend not to like this, especially when banks hide their fees under special rules, such as "If your balance exceeds one thousand ...