Fifth Third is expanding its IT division to increase its digital banking and data analytics capabilities all part of a digital transformation project designed to optimise the customer experience. Robin Arnfield investigates
Cinncinati, Ohio-based $154bn asset Fifth Third is hiring over 200 developers, business systems analysts and project managers to add to its current team of 750 IT staff. By the end of 2016, the bank plans to employ over 1,000 IT experts, up a whopping 27% in less than four years.
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By GlobalDataSid Deloatch, Fifth Third’s CIO, told RBI that the new hires will be tasked with projects ranging “from improving our mobile app to improving our back-end operations that provide better experiences in our financial centres, call centres and for all our products and services.”
Head of innovation
In April 2016, Fifth Third appointed Steve D’Amico, most recently Procter & Gamble’s director of design innovation, as senior vice president and head of innovation, a newly created role. “D’Amico will be responsible for creating an embedded innovation capability – including human-centered design, rapid prototyping and deep customer research – throughout Fifth Third, so the bank can rapidly develop useful products for customers,” the bank said. “He will also develop an ‘open innovation’ capability and work to connect Fifth Third with the best external companies and tech incubators.”
“Our customers are at the centre of everything we do,” said Greg Carmichael, Fifth Third’s President and CEO. “To accomplish this, we need to invest in digitisation and data.” Carmichael joined Fifth Third in 2003 as CIO, was named President in September 2012, and became CEO in November 2015.
Chief digital officer
Melissa Stevens, a former Citigroup executive, has joined Fifth Third as senior vice president, chief digital officer and head of omnichannel banking. She will report directly to Chad Borton, executive vice president and head of consumer banking.
Stevens most recently served as managing director and chief operating officer for Citi FinTech, a unit charged with creating a smartphone-centric business mode. She also was the head of Citi’s Consumer Innovation Labs. Prior to that, she was global consumer digital banking head with responsibility for all digital properties and apps in Citi’s markets throughout North America, Latin America, Europe and Asia.
At Fifth Third, in a newly created position, she will be responsible for creating the strategic plan for an integrated omnichannel customer experience, including both sales and service, for all lines of business. She will also direct tactical execution in implementing new functionality, processes and systems to deliver superior experiences for Fifth Third’s customers.
Consumer behaviour
Fifth Third is investing in technology in response to consumer behaviour changes. “Our customers’ digital expectations continue to evolve, and many of these expectations are set by using non-bank apps such as shopping and games,” said Chad Borton, executive vice president and head of the Consumer Bank at Fifth Third.
“Our mobile app is the product that our customers notice first when they think of tech and the bank,” said Deloatch.
Recent enhancements include adding Touch ID authentication to Fifth Third’s iOS app in February 2016, letting customers log in by fingerprint instead of passwords. Within eight weeks, almost half of customers eligible to enroll for Touch ID had done so, says Jason Kammer, senior channel manager for mobile banking for Fifth Third.
Fifth Third’s fast mobile app allows customers to:
- Access their balance without logging in, using Now Balance;
- Make payments;
- Transfer money with a few taps;
- Deposit a cheque with just a hover;
- Set up alerts with the swipe of a thumb;
- Check the past 24 months’ statements;
- Log in with Touch ID for iOS.
Fifth Third’s total mobile customers increased by 28 percent from 2014 to 2015, while mobile usage was up 21 percent and the number of “mobile-only” customers jumped 58 percent from 2014 to 2015.
Last year, Fifth Third had 19 million mobile banking logins, and sent 13.9 million mobile banking alerts, up 144% from 2014 to 2015. The most frequently used Fifth Third mobile services are checking balances and activity, transferring money, and depositing cheques.
Fifth Third says that in the first two months of 2016 nearly 18% of its total deposits took place via mobile, up 40% year on year. Also, 57% of its new customer households use mobile, while 39% of all of its customer households use mobile.
“In 2015, our growth in mobile users exceeded the industry average,” Carmichael said in an April 2016 earnings call. “Indeed, it accelerated while the rest of our industry experienced a slowdown. In addition, we’ve doubled the number of chequeing accounts that were opened online from a year ago.”
Branch closures
In June 2015, in response to the growth of digital banking, Fifth Third said it would close or sell 107 branches by mid-2016, representing about 8% of its total network. Carmichael said in the April 2016 call that Fifth Third “is on track to deliver $60m in annual expense savings related to these reductions.”
As at 31 March 2016, Fifth Third operates 1,241 full-service banking centres, including 95 Bank Mart® locations inside grocery stores and 2,556 ATMs in Ohio, Kentucky, Indiana, Michigan, Illinois, Florida, Tennessee, West Virginia, Pennsylvania, Georgia and North Carolina.
In its Q4 2015 earnings presentation, Fifth Third said it is building an omnichannel infrastructure to combine physical (ATM, branch), virtual (call center, remote specialist) and digital (mobile, website) channels at a cost of $73 million. This includes investing in image-based systems to reduce workload and speed up processing in branches and in technology to increase digital resolution of customer service enquiries.
“People want answers in real-time and expect their bank to be open 24×7,” said Deloatch. “They also expect real-time account balances and alerts if their accounts drop below a certain amount. Our mobile enhancements help, but also the real-time responses on social media through Facebook and Twitter.”
According to Kevin Sullivan, Fifth Third’s managing director for distribution strategy, the bank wants “customers to have the option to go online at home, to have a voice chat or a video meeting with the universal banker and talk to a specialist without having to go to the bank.”
Analyst comments
“For all the hype about mobile banking, most US banks Celent has surveyed see less than a third of their retail and business clients using the channel, and annual growth rates are beginning to decline,” said Bob Meara, senior analyst at US-based consultancy Celent. “And that’s a transaction view. Our survey also looked into where U.S. banks are closing new product sales, and the results are stark; mobile accounts for just a few percent of total sales production, while the branch channel still accounts for 80% to 85%.”
“Branches are where the sales are today,” Meara said. “But digital is where sales are going. How far and how fast this will happen, varies dramatically among market segments and from institution to institution. Many FIs underestimate the importance of the mobile banking channel because of its relatively low contribution to today’s transaction and sales mix. However, the future will bring a very different result. FIs need to be planning for this outcome – indeed influence it. The large banks already are, and it shows, particularly at Fifth Third.”
“When IDC Financial Insights talks about digital transformation in financial services, we use five dimensions for measuring this: leadership, omni-experience, operating model, information/IT and worksource,” Jerry Silva, IDC Financial Insights’ Global Banking Research Director told RBI.
Silva said Fifth Third’s IT announcement shows it is touching most of the bases IDC has outlined as critical for digital transformation, starting with leadership.
“Greg Carmichael was CIO and is now CEO. This tells me Fifth Third is very invested in the digital transformation journey right from the get go. The most successful banks going down that path such as Santander and BBVA all have one thing in common: they start with leadership and this transforms their entire culture.”
Silva noted that Fifth Third’s branch closures frees up money to hire people, which covers the worksource dimension.
“I’ve talked to bank CTOs and CIOs over the last two years and they say worksource is one of the most challenging areas of digital transformation for them,” he said. “It’s not just about finding the right people, because the executives tell me today’s generation doesn’t want to work for banks or even for Google or Apple.
“They want to start their own FinTech and do their own apps. So finding and keeping the right people is a challenge – how do you engage them and adapt to their lifestyle as opposed to the traditional 9 to 5?”
Outsourcing
“IT staff’s skillset has to change, as it is no longer about coding,” added Silva. “It’s about governance of the external partners you’ve hired to do the coding. Over the last 12 months, I have seen executives like Carmichael focusing on infrastructure and data analytics, and looking at cloud-based or outsourced systems. The thinking is that there are experts whom you can outsource to and who are better than people you can hire yourself.”
“The massive explosion in data is creating unprecedented manageability issues for FIs that can be linked to factors such as the rapid expansion in customer touch-points; emerging types of structured and unstructured data associated with new customer engagement platforms and social media content; real-time data processing and analysis necessary to provide timely insights to improve decision-making and customer experience; and rising data security concerns that continue to plague banks both internally and externally,” David Albertazzi, Senior Analyst at Aite Group told RBI.
“The fact that Fifth Third is closing branches to fund digital falls into the omni-experience dimension,” added Silva. “But it will have closed just the right branches rather than picking them out of a hat, as it will have looked at its branches from a geographic and neighbourhood presence perspective to ensure it maintains its touch with consumers. Last year, IDC did a U.S. consumer survey and found that fewer than 30 percent of millennials preferred to open accounts via online or mobile channels and over 60 percent still want branches or contact centres.”
Fifth Third is on the right track as it is looking at digital transformation from the perspective of back-office infrastructure, Silva said. “Too many banks think digital transformation is about focusing on the front office and that this is strictly a mobile initiative,.
“So you have front office teams doing digital transformation exercises the CIO knows nothing about, spending money on technology to fulfil digital transformation from the consumer perspective. But this leads to a lot of inefficiencies when it gets to the back office.”
Targeting millennials and unbanked/underbanked
In November 2015, Fifth Third launched the Express Banking product for unbanked/underbanked customers and millennials. According to the bank, the account responds to millennials’ requirement for an account that isn’t a traditional chequing account but a banking product that is simple, transparent, convenient and affordable.
In 2013, the FDIC (Federal Deposit Insurance Corporation), reported that one in four US households was either unbanked or underbanked, while KPMG’s 2014 Banking Industry Outlook Survey found that the underbanked are growing at a faster rate than the overall population, especially among younger consumers. Fifth Third has acknowledged that its footprint includes some of the highest underbanked markets in the US including Kentucky, Florida and North Carolina.
In February 2016, the Consumer Financial Protection Bureau (CFPB) announced an initiative to improve chequeing account access. The US government agency sent letters to the 25 largest retail banks encouraging them to make available lower-risk deposit accounts that prevent customers from getting into overdrafts they cannot pay off.
“Our Express Banking product received high accolades directly from the CFPB,” Carmichael told analysts, in the bank’s first quarter earnings call.
“Since we launched this product in November 2015, we have opened over 65,000 new customer accounts.”
Express Banking has no monthly service fee, no minimum deposit for new accounts, no overdraft and no monthly balance requirement, and offers features such as mobile and online access, cheque-cashing, direct deposit, money orders, remittances and cashier’s cheques. The more consumers use qualifying Express Banking services, the more discounts they earn on these services.
