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Hans Verkoren


For a bank that's barely six years old, ING Direct has generated more than its share of buzz. The Amsterdam-headquartered Internet bank boasts 7.5 million customers in eight countries and $85 billion in assets. That makes it significantly larger than rivals Cahoot or Bancopopular-e.com. And while most online deposit-takers are losing money hand over fist, ING Direct posted a tidy $8.2 million profit in the first quarter. "Its growth has been remarkable," says Sven Janssen, an analyst at Bankhaus Metzler, a private bank in Frankfurt.

The driving force behind this success is Chief Executive Hans Verkoren. An economist by training, Verkoren, 56, says his secret is savvy marketing, a simple range of products, and management's willingness to do what few other Internet banks do -- offer online customers telephone-based support. Simple, yes, but smart. "We're a virtual bank in that we have no branches," he says. "But even Internet customers want to use the phone sometimes, and we don't discourage that."

Verkoren cut his teeth at the Netherlands' PostBank, which he joined in 1978. To reduce its costs, PostBank wanted to cut the number of transactions it performed through the branches of the Dutch Post Office, its main distribution channel. So it began marketing its products directly to customers through the mail. Not very high tech, perhaps. "But it proved a highly successful technique," Verkoren recalls.

That's why this affable Dutchman felt no compunction about replicating the strategy when he was asked to set up ING Direct in 1996. "We knew the approach would work even in places where we did not have an existing customer base," he says. Verkoren was given the mandate of setting up an international retail bank -- something that several European financial institutions have tried, and failed, to do in the past decade.

The Dutch solution is to go international, online, and over the telephone all at once. The Web and phone routes skip the need to build brick-and-mortar banks in new markets and tend to reach a rich segment of young, affluent, tech-savvy consumers. ING Direct has succeeded in markets as diverse as Germany, Spain, Australia, and the U.S.

Keeping it simple is part of the trick, says Verkoren. "We usually lead with a savings account and then offer other products later," he says. But the real attraction is the bank's rates. In the U.S., ING Direct offers a 2.2% annual percentage rate on a one-year certificate of deposit -- one of the best rates available in the country, according to Bankrate.com, an online clearinghouse for financial information. In the U.S., demand is so brisk that ING Direct is expanding from its base in the Northeast to the West Coast. "We expect to have as many customers there in a few years as [the 3.5 million] we currently have in Germany," says Verkoren, who in his spare time enjoys travelling through France, indulging his hobby of wine-tasting.

With its roster of customers set to surpass the 10 million mark next year, ING Direct is becoming increasingly significant for its parent. That's why ING Group Chief Executive Ewald Kist is pumping money into the operation. In February, ING Direct shelled out $350 million to buy Entrium, Germany's second largest direct bank. And in May it set up an outpost in Britain, one of Europe's most competitive financial-services markets. "We will continue to invest in profitable growth," says Kist. More and more European banks are taking the online route to increase their customer base without boosting costs. But none has expanded as quickly as ING Direct.

Of course ING's strategy doesn't come without risks. Competition could increase sharply once the global economy starts expanding again and other banks begin beefing up their online ventures. But Verkoren hasn't come this far to give up his edge. Look for more surprises from ING Direct.


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