Annerie Vreugdenhil:

When we created BUUT, we said to the team, there's two guiding principles that you have to adhere to. The first one is all your decisions have to work towards the fastest possible time to market. And the second one was don't bother the mothership. You are on your own. You just go and build it.

Bianca Lopes:

How do you build with the speed of a startup when you're operating at the scale of a major bank? How do you reach new customers while serving the ones you already have? And how do you keep the spirit of a startup alive inside of a bank that's been around for a hundred years? ABN AMRO has answered these questions. This week on Fintech Files from BCG Platinion, we're joined by Annerie Vreugdenhil, Chief Commercial Officer for Personal and Business Banking at ABN AMRO. To explore how a major incumbent is rethinking who a bank is for and what it can be.

Annerie Vreugdenhil:

ABN AMRO is one of the larger banks in the Netherlands, which means that we are everything to everybody. We're a universal bank in the Netherlands. We also have activities in other Northwest European countries, but especially in the Netherlands, it's a mature market, it's a mature economy, so growth is something that you really have to work very hard for. So actually, when you look at our client base in the Netherlands, the challenge for universal banks like ourselves is that you have to be very mindful of elderly people who are not very digital or who have very different needs, but also you have to cater for the special wishes of Gen Z, Gen Alpha, and everybody who's coming afterwards. So they are obviously digital natives. They have grown up with Instagram and TikTok. They expect the same kind of flows and service from the bank. So that's why we are constantly thinking about how can we actually increase our market share, increase our position with those generations? How can we be very attractive to them and really cater for their needs?

So that's why we acquired BUX. That's why we launched BUUT. And NIBC also really is an important one in a potential combination with BUX. BUX is a neobroker. We acquired it two years ago and BUX is really having a very digital flow. It's very innovative. It was one of the first in Europe to create fractional shares so that people can buy a piece of Apple without immediately spending thousands of dollars. It has a very easy flow, so it very much appeals to the younger generations. And I think if you are a bank like ourselves, we have a very good app, it's very well rated and it's very complete, but that also brings complexity for the customer. So sometimes it's better to really have a specialized segment, especially for other generations who expect a different kind of flow.

And there we decided, well, to attract the younger generations to, in this case, at least our market share, we acquired BUX. So what we immediately did is that ABN AMRO clients can access BUX from their ABN AMRO app. So they can become a client of BUX as well from their ABN AMRO app. So that is very seamless for people. And obviously people ask me, "then yeah, aren't you worried about cannibalization of your client base?" But what we see is that, especially people who have never invested before, they find BUX very easy to use and with a very low barrier. It's simple for them and they can do small amounts. So actually what we see is that it attracts the clients that are new to investments. So we are making the pie bigger for the group ABN AMRO. And that is to me always the way I look at this.

Annika Melchert:

You mentioned a super interesting point when you compared your customer groups. What then do you need to keep in mind or how do you design products for customers who've basically grown up with TikTok and Instagram? And what does it then mean for how a banking app should feel?

Annerie Vreugdenhil:

Yeah. So this is a very good question. And so at some stage, two years ago, I think, we looked at my management team about what do we have as very special assets and also what are the trends that we see. And a big trend that we were seeing is that a lot, a lot of people are actually financially vulnerable, that they could be in trouble if they don't manage their finance as well. And what we saw is that especially younger generations struggle even more. So a banking app still has the logic of 20 years ago where you would go to a branch or you would get a daily statement in paper where you get your information from. But this doesn't connect to the people who are used to, for instance, Instagram or TikTok. And especially that generation, you need to actually trigger them in the way that they are used to, but also there are so many temptations for them.

So TikTok is probably fun, but it also makes it very easy to buy stuff. If you combine it with stuff like buy now, pay later. So the temptations for the younger generations to spend money are way bigger than I had when I was young, where I also could physically feel the value of money. It was gone when I was out of cash. And now they simply don't know. They don't know how much debt they're accumulating when they buy certain stuff with buy now, pay later. And it's something that we got really concerned about that we said we have to play a role here and have to create something that will help this generation to be financially healthy. And that's when we created BUUT. So we launched it last year. It has the mission to create the generation that is more financial healthy than any other generation.

And we really have done it in a way that attracts the younger generation in the way they are used to deal with online and digital things to banking, basically. BUUT is at the moment available for parents and teenagers. So we have the age category of nine to 16. They have to do it together. We stimulate that they talk to each other about money. There's parental control if they agree to do that. So a nine-year old will probably have a lot of parental control and a 16-year-old probably not so much. It doesn't look and feel like a bank at all. It looks like Instagram. It looks like TikTok. We have reels there of a few seconds. So this is a way in which we interact with the kids.

Annika Melchert:

This is also super cool instrument to then really educate the younger generation because in the past episodes, we discuss frequently how Gen Z can start investing earlier, but this then also tackles, I think it's called Generation Alpha, to really get to know to healthy spending habits at a very early age.

Annerie Vreugdenhil:

Exactly. That's exactly what we try to do. So for those kids, it's really difficult to understand the value of money. And we also recognize that in the Netherlands, we speak quite negatively about money with our kids. So we say, "We don't have a money tree in the garden." That's the kind of things we say to our kids.

Annika Melchert:

It's very similar in Germany.

Annerie Vreugdenhil:

And it doesn't resonate with teenagers at all. So what we now do in BUUT is that we say, "How many hours should I work for a sausage roll?" And that triggers the thinking of kids about money. Then think, "Okay, yeah, yeah, yeah. If this is how many hours I have to work, maybe I don't spend so much on sausage rolls." So it's really our intention to create a financially healthy generation and to have kids and parents speak about money and get the behavioral change going.

And I was so happy. So we launched officially in September last year and after three months, we did a survey amongst the parents whether they saw any change in behavior of their children. And even already then, so three months after launch, 85% of the parents said that they saw a change in behavior of their children. So they were talking more about money. They were all of a sudden budgeting. They were really saving for things they wanted to do. We found a way to really hit a nerve with the youngsters and to get something going that they understand.

Annika Melchert:

I can imagine that running such innovative projects or such a cool innovation strategy can sometimes also be challenging since ABN AMRO is also considered a bit more traditional bank when you compare it to having very lean neobank operators here. Can you share a bit of what are the biggest challenges from an innovation strategy point of view?

Annerie Vreugdenhil:

Annika Melchert:

This is super fast.

Annerie Vreugdenhil:

It's super fast, but interestingly enough, this period was shortened with four months because in the end, we did use the mothership. So obviously also the mothership, ABN AMRO Bank is progressing in marginalizing its systems in really changing its architecture and technology to meet the demands of today. And we came to the conclusion at some stage that by using the APIs of the bank for a couple of the critical processes, we could actually accelerate our launch with four months. So there's a couple of items where we actually do use the bank and the connections make it better, faster, also easier on some critical processes where you have to get it right. So the combination of the two actually works really well. And then obviously there's also challenges. Up to launch, everything's fine. And then everybody gets excited also in the bank and then they say, "Yeah, but they have to follow this process and they have to follow that process." So what I call the immune system of the bank is starting to come up.

Bianca Lopes:

For most banks, launching a new product takes years. Regulatory sign-offs, legacy infrastructure, internal governance. The average core banking transformation alone can run to half a decade or more. For neobanks and fintechs, the bar looks very different. The question for incumbents has always been whether they can close the gap without sacrificing what makes them a bank in the first place.

Annika Melchert:

How do the different teams then interact internally, like the challenger brands and then the traditional bank?

Annerie Vreugdenhil:

So what we did is all our challengers are together in a separate building, which is far enough away that people cannot walk over, so they cannot be there all the time, but it's close enough that I can be there often. So that's a little bit how we organize it. So they have their own teams, their own structures, their own way of working, and obviously there's a lot of interaction with the bank, but this is literally by creating physical distance, it also helps in keeping them a bit safeguarded from being morphed into the bank.

Annika Melchert:

And from an organizational structure, so you then basically move between the two buildings. Then what about your teams? I'm more curious also about the IT itself. How does this then work organizationally?

Annerie Vreugdenhil:

They are pretty much autonomous, but not completely. So my chief innovation officer of my chief IT officer in my management team for all my responsibilities is also very involved with BUUT and the other challengers simply because I need somebody on my side who will tell me this is good enough, this is safe enough. So he's as much involved as I am, but then the head of BUUT, he has his own teams below him. So we try to limit the number of hierarchical lines to those teams because then we will spend a lot of time on internal governance rather than on building new features. But it's a constant juggle. We're constantly thinking of how do we have to adjust? Should we adjust? No, maybe yes. How do we do that? It's a very interesting thing to do with the combination of the two, but the combination also has its benefits and that keeps everybody motivated to constantly think of the right way to do it, use the benefits of the combination and keep it separate where it adds value.

Annika Melchert:

How do you then decide about whether you build something or buy something here, specifically with all the options you now have through your neobanks?

Annerie Vreugdenhil:

Yeah, that's a very, very good question. So from BUUT we actually partnered a lot. So the core banking system is Mambu. We didn't use the whole box, but we used parts of it.

Bianca Lopes:

Mambu is a cloud-based core banking platform, modern, modular software that handles the behind the scenes operations of a bank. Unlike the legacy systems most incumbents are still running on, it's built on to be updated quickly and integrated with other tools, which is part of why it's become a popular choice for banks looking to build and launch new products.

Annerie Vreugdenhil:

We needed a very good virtual card management system and we found a young company in Brazil called Pismo that we partnered with and fortunately, which made our life a little bit easier, Pismo was acquired by Visa and we already had contracts with Visa, so we could use the master agreements. And then there's a lot of stuff we build ourselves. So especially what you want to build yourself is the differentiating factors, which is obviously your look and feel, and the look and feel is completely different than you've ever seen as a bank. It's a nice little anecdote. So when we started to test BUUT with potential clients in the friends and family pilot, the children immediately got it. So their flow was so intuitive to them and so natural to them, but parents, they were really thinking, "What on earth is this?"

And we had to explain to them that it was actually a bank. So we then changed the payoff that we now have in the marketing to say a bank that does it a Tikkie different because we had to make clear it was actually a bank. It doesn't look like it at all. It has payment jars. You can have more than one payment jars or you can have one for lunch at school, you can have one for fuel for your scooter, you can have whatever you want. You can make as many as you want. You have savings jars and there are little colorful tiles on your app with which you can pay. So you have a bank pass, obviously, and before you pay, you can select from which jar you will pay this. You can ask for money when you have been babysitting and then have it immediately in the right jar.

So it's a very different setup and system than people are used to. And with the video reels, so that's the top part of the little iPhone screen, because that's what you're looking at is just on mobile. The top is your jars, your payment jars and your saving jars. And the bottom part is reels like on Instagram.

Annika Melchert:

I don't want to imagine my own dad trying to navigate this. I think when you have not grown up with this, it's super tricky, no?

Annerie Vreugdenhil:

Yeah. But the interesting thing is, so we really had to tell people it was actually a bank, but now the parents, really large part, more than 50% of the parents are saying, "I want this for myself as well." Because it's so easy to manage money in this way that they also want it. And I say, "Well, we will have 18 plus in the summer, and then it will still content-wise be tuned to different age groups, but at least they can use the functionality." So I'm looking forward to that phase, I must say.

Annika Melchert:

I'm wondering then, what's the end game here? So do all of the satellite brands eventually merge back into the mothership, or is the plan to stay separate forever?

Annerie Vreugdenhil:

That's a very good question, and it's also a question I don't have an answer to yet. This is really the phase in which we grow our challenger brands exponentially, and we have more than BUX and BUUT that we just touched upon, but that's the big game at the moment. We have to grow them, we have to get to exponential growth. And then let's see, because it's also a different tech stack, so let's see what happens. Let's see how it all resonates with clients. In the end, this is stuff that you validate all the time, and based on the validations with clients, you will make your choices.

Annika Melchert:

So you mentioned already earlier that you're having Mambu as a core, which is a super modern core banking system, new API base, but if you now were to advise other incumbent banks on modernization, what would you tell them to do or maybe also not to do?

Annerie Vreugdenhil:

Core bank migration is one of the most difficult things I think you can do as a bank and I've-

Annika Melchert:

I know. I've also experienced this quite sometimes.

Annerie Vreugdenhil:

I've once done it. It was a trajectory of seven years and it succeeded, which is already a big thing in itself. There's a lot of technology out there. Mambu is one, there's other ones as well, but in the end, you have to be ready for a migration. And a migration really requires that you clean up your shop internally first. So the worst thing you can do is migrate broken processes or migrate a zillion number of exceptions. You have once built for one client. The biggest thing you have to do is really make sure that you are standardized and super digital straight through already before you move. And that is something you have to do as an incumbent bank anyway. So it's a good trajectory to have. And I wouldn't start migrating a core bank before we have done that to a very, very large extent. But migrating a core bank is not something I'm looking forward to, to be very honest.

Annika Melchert:

But if you have done it recently, I think it also gives you a bit of time then until the next migration or even core banking upgrade is due. Looking a bit into the future, so in 10 years from now, what does a successful incumbent bank look like and also how different might it be from today?

Annerie Vreugdenhil:

Yeah, I think 10 years from now is way too long because things are moving so unbelievably fast that I think a bank will look very different two years from now, from today. I think what is super interesting, what's happening at the moment with obviously the launch of GenAI, and we are doing a lot with GenAI. We were very fortunate to already get a private version of ChatGPT in March '23. So we were very early in adopting this and building applications for it. And also already then, you saw the potential of this. So in six weeks, we had our first application live at the contact center, and this is really the speed that this is making possible. So 10 years is way too long, but the big change that's happening today is all about agentic and even that it's going so fast. Half a year ago, I talked to my team about it and we came to the conclusion it was too early yet to really go for agents. And three months later we said, "Okay, now's the time.

We have to think about agents." It will really change your architecture. So to have a protocol layer that actually can work and steer a couple of agents that actually go to actions in the product suite, but also interacts with the customer in the way the customer is used to. And the customer is adopting very, very quickly to this change. So where you are used to click buttons to go to payments, customers are now just talking to their computer in ChatGPT, asking long questions, and that is what we are also working towards. Everything has to be conversational. I just had a demo for my own teams. They built the first agent and they build it like this. You can actually talk to the computer and you can ramble to the computer and it makes sense of it and it gets to an action. So this is going so unbelievably fast.

This will completely change the backend of a bank. This will change the interaction with clients. Also, your client at some stage will no longer be a human being, but will be an agent. And how do you know there is a customer with an intent behind it? So it's super exciting, actually, what's happening today.

Bianca Lopes:

This has been Fintech Files from BCG Platinion. This season, we're digging deep into the ideas reshaping the future of Fintech. Make sure you're subscribed so you never miss an episode. Thank you so much for tuning in. We'll see you next time on Fintech Files.