Peter Aceto on ING Direct’s Mortgage Strategy

When Scotiabank bought ING Direct Canada in 2012, people wondered about the implications for ING’s mortgage business.

Peter-AcetoScotia is a dominant force in the mortgage business, being one of the country’s top lenders. Would it allow ING’s more borrower-friendly mortgage model to remain intact?

We posed this question to Peter Aceto, ING Direct Canada’s CEO. Out of all banking industry executives, Aceto is possibly the most in touch with consumers. Case in point: his blog and his Twitter feed.

Here’s how he and ING Direct plan to approach the Canadian mortgage market going forward.

ING Direct has a long history of mortgage innovation. It, more than any other Canadian company, established the model of selling mortgages with no face-to-face interaction. ING also gave consumers industry-leading mortgage flexibility and championed transparent mortgage rates (in stark contrast to the major banks’ misleading “posted rates”).

We asked Aceto what to expect from a mortgage standpoint when ING is renamed to Tangerine (which will happen before July — April reportedly). “The product hasn’t changed (since being acquired by Scotia),” he said, “and it won’t change.”

That’s fortunate for customers, given that ING’s mortgage is one of the most flexible in the country (with 25% prepayment privileges, honest penalty calculations, a favourable blending policy, etc.).

ING-DirectING’s 1.9 million customers will continue dealing with Tangerine employees, and not Scotiabank reps. Customers “talk to our people today and that will continue to be whom they speak to 2-3 years from now.”

Aceto also confirmed that ING customers will not be offered or renewed into Scotiabank mortgages, as some have speculated.

One thing that will change at Tangerine is how ING generates mortgages. “We used to purchase mortgages through white label channels and brokers,” Aceto notes. “The only way we’ll be involved in mortgages going forward will be the direct-to-consumer channel.”

ING has a total mortgage portfolio of $25.7 billion. Of that, $19.9 billion are mortgages that it acquired through broker and white label channels (strictly as investments), just under a billion are commercial mortgages, and the rest are from its direct consumer channel. Despite speculation that ING was liquidating its mortgage portfolio in recent quarters, Aceto confirms: “We haven’t sold any (mortgages) to anyone.” That said, its broker, white label and commercial portfolios will wind down over time, he adds, and Tangerine’s direct-to-consumer volume “won’t compensate” for this shrinkage.

Mortgage pricing under Tangerine remains to be seen. But ING’s rate strategy today is a clear departure from the ING of old. The company used to consistently advertise rates below its big bank competitors. But since the Scotiabank acquisition, its advertised mortgage rates leave something to be desired.

At this time, for example, ING’s advertised 5-year fixed rate is 3.99%, higher than almost every other bank in Canada. It’s even ½ point higher than Scotiabank. A few years ago, that would have been unheard of for the product it bills as the “unMortgage.”

“A lot has changed…Some years ago we posted a rate that was our best foot forward while most of our competition didn’t. They posted a higher rate…and would negotiate after. Most Canadians, with a little bit of negotiation, didn’t pay the posted rate. Now, we’re seeing lower posted rates and promotional rates being advertised. I wonder how many Canadians actually [qualify for] those promotional rates.”

What ING’s inflated advertised rates really seem to indicate is that things are different under Scotiabank. Its marketing spend is significantly lower on mortgages than it used to be, says Aceto.

ing-canada“We’re not aggressively trying to grow our business through the (ING Direct) mortgage channel.” The company’s focus is on attracting deposits and building new banking products like overdraft protection, credit cards and investments.

ING is also no longer in the broker business. That’s important since its publicly advertised rates needed to be close to its broker rates (and broker rates are usually very competitive).

ING closed its broker arm because, as Aceto explains, “We’re a direct bank. We’re really good at doing business with people over the web or by phone or on a mobile device…We were in the broker business because we were good at [getting deposits] and needed to put that money to work…When Scotia bought us they were the largest [broker channel lender] in the country and it gave us the chance to be a direct business again.”

But Aceto admits a direct mortgage model isn’t for everyone. “By and large, people are more comfortable getting other products (with a branchless bank).”

“We think that there are over 12 million Canadians who would be willing to buy one or more products from a bank that has no physical presence.” But ING’s surveys indicate that “mortgages are in the bottom half of the list of products customers want from a direct model.”

Why is that? “Our competitors have Canadians a bit confused and it’s hard for people to compare offers side by side,” he says. “People believe the mortgage product is complicated…and very significant (financially)…They feel that face-to-face interaction is necessary. It’s not my view.”

Competition has also dictated ING’s mortgage strategy. “It is undeniably true that mortgages in general are less profitable today,” says Aceto, adding that “it’s not just mortgage pricing that’s more competitive, but savings rates as well. That’s squeezing interest margins in two directions.”

“Maybe 10-15 years ago people thought mortgages were the cornerstone of a banking relationship. I think mortgages now are commodities. People probably care an awful lot less about whom they’re doing business with…and they try to get the lowest rate they possibly can. And I think that’s one of the reasons why brokers continue to be very successful.”

Factoid: About 40% of ING customers in 2013 were referred by its existing customers.

Rob McLister, CMT

  1. Once upon a time ING direct Canada had some interesting mortgage offers.
    That was a long time ago. Now they are far from best rates on the market, maybe that’s the strategy of the new owner ? If true, it works :) I’ll never go to ING for mortgage :)

  2. It’s worth noting the rebranding to Tangerine will NOT occur “before July (2014)”.
    In point of fact, it will occur much quicker than that, as ING DIRECT Canada has repeatedly reiterated. (It’s actually been too long, in my opinion…they dragged out the rebranding/relaunch much longer than necessary already!) The rebranding MUST take place by April 30th, 2014, as that is the very LAST day they are permitted to use the ING marks in Canada as per their agreement with ING Groep. Speculation recently, and seemingly confirmed via the print press, is that it will occur BEFORE the end of March. :)
    Hope that clarifies…(you may want to modify your article, though.)
    Doug M.

  3. It seems to me based on what I see on social media, that ING is more popular for their savings accounts and investments. I haven’t seen a mention of their mortgage products for ages.
    It’s apparent from Mr. Aceto’s comments that these are the carrots ING is using to draw in new customers. . .no longer the mortgage product. With those rates, I would say that’s blatantly obvious!

  4. If you look at big bank acquisitions over the past 20 years, everything they acquire turned to crap. That’s because the bread and butter of their earnings is retail banking. Subsidiaries cannot undercut the branch network. Their direct-to-consumer option has no chance of delivering the same level of business. They will become a small insignificant player like PC Financial, a fly on a elephant’s butt, which is a shame because they had such huge potential. They could have used the unMortgage concept to establish a relationship with consumers in tandem with developing credit cards, more investment options, LOCs, etc. But it looks the mortgages are being placed on the back burner. The fact that 20 billion of your mortgage business came from brokers and only one billion came from your own sales force, what does that say about your sales force?

  5. Basically, they do not want to sell mortgages anymore. Posting higher rates is simply a deterrent….They want money to come in to finance other projects. I think Scotia’s strategy was simply to buy a bank of ‘virtual’ customers. If ‘virtual’ is where the banks are heading, Scotia is definetely 1 step ahead of everyone else.

  6. I’m not sure that I agree with Aceto’s comments the mortgage product has always been a lost leader (the Banks don’t typically make money on them) it draws the consumer in and then the institution hopes the consumers are attracted to their other products like lines of credit credit cards and TFSA accounts etc. It was never about the mortgage but the mortgage was made attractive to get them in the door. It is however a shame to see ING’s competitiveness and uniqueness die that’s what made them so attractive now there is nothing special about them!

  7. Scotia had a very successful broker sales division. From the day the deal was signed there was no chance that ING would continue to deal with brokers.
    Lior is right on one main count: the big 6 banks will mainly defer to their branch network in terms of product offerings. That does not mean we can’t use bank lenders it just means we have to understand how they view their business

  8. Why would he say “by June”? That makes NO sense.
    They’ve already to committed to an “April 2014” launch from their Nov. 2013 announcement. They have to change the name by April 30th, at the latest, unless they got an extension.
    I would’ve liked to see you press him more on that point, asking him why not in April 2014 as previously indicated by the company or March 2014, as indicated in recent press reports.
    I would’ve also liked to hear more details on why approximately $19-20 billion of ING DIRECT Canada’s $25 billion mortgage portfolio was moved to “run-off” in Q4. Your interview touched on it a bit. Are they saying that $19 billion is their mortgage broker-originated portfolio and the $6 billion is roughly what they’ve sourced directly? Are they basically giving up on trying to retain any of the broker-originated portfolio by moving into the direct sales-sourced portfolio? Also, any idea what the maturity profile is on the $19 billion portfolio earmarked for run-off, i.e. what percentage of that portfolio comes due for renewal in 1, 3, 4 and 5 years? I’m guessing most of it comes due in 3 or 4 years (not 5 years anymore, since they exited the broker channel this time last year), but maybe the bulk of it is sooner. What’s YOUR impression – do you think Scotiabank will try and sell any of that portfolio ahead of time, whether it to be essentially as a transfer/rebranding under Scotia Mortgage Authority’s sales force or sold to another party like a Street Capital or First National Financial? What are YOUR personal thoughts on that?
    Appreciate your insight. :)

  9. Where do you get $1 billion from? I show roughly $20 billion of ING DIRECT Canada’s mortgage portfolio in “run-off” in Q4, meaning that is likely broker-sourced, leaving $4-6 billion of, one can only assume, direct sourced mortgages.
    Still, it’s not that great. Impressive for a direct marketing operation nonetheless, but it shows, unless you either have a branch-based channel OR use the mortgage broker channel, it’s incredibly tough to compete in the mortgage market. The direct sourced model seems to be the toughest place to be and that’s why I really question Kevin O’Leary’s interest in getting into the mortgage market, but without a branch channel and without using mortgage brokers. I doubt he can even get $500 million in mortgages, which ain’t much. ;)

  10. Welcome to the ‘new’ model of retention by government policy. I suspect an adequate portion of their portfolio are deemed automatic ‘quiet’ renewals, thanks to qualification issues. As Peter eludes to “I wonder how many Canadians actually [qualify for] those promotional rates.”

  11. I thought I’d point out that ING DIRECT Canada confirmed, via Facebook (see:, that Tangerine WILL launch (as scheduled) by mid-April 2014, not in May or June as the story seems to indicate. Aceto, if that’s what he said, clearly misspoke. Thought I’d pass on the “tip” so you can update the story, as required. ;)

  12. Thanks, Rob. I actually didn’t think you guys would’ve misquoted him (I’m sure you make notes/recordings of your interviews.) So, I tended to think Aceto may have misspoke (an error on his part, not CMT’s) so glad to hear ING DIRECT Canada corrected that. :)

  13. I am currently an ING customer, my Mortgage is with them and not with scotia who could not match the rate at the time. I liked to call ING no B.S. banking, what you see is what you get without having to go through a lot of effort for little results. I have realy enjoyed being their customer and picked them for the low rate and flexibility, I pay accelerated and have an increased biweekly payment. My renewal is next year, but from what I see on their site, I will not be renewing with them. Obviously Scotia wants the Mortgage arm to die, customers will leave ING, but will not go to Scotia, chances are they will take the rest of their accounts with them as well. So far over the years I have moved most of my accounts away from Scotia due to them changing policies to drive away customers. It looks like they are repeating this with ING now.

  14. They say nothing’s changed since Scotia Bank took over.
    Well something will change.I’m moving my mortgage to a more competitive institution.

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