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Published in Finance

Fifth Third CEO on pandemic driving digital banking: ‘It’s going to stick’

BY Sunday, August 30, 2020 04:45pm

The COVID-19 pandemic that shut down much of the economy in March had all businesses scrambling to maintain operations — if they were allowed to stay open — and keep employees safe. Banks closed their branch lobbies and directed customers to use drive-thru lanes or digital banking to handle transactions. 

As the economy rebounds, Greg Carmichael — chairman, president and CEO of Cincinnati, Ohio-based Fifth Third Bancorp, the market leader in West Michigan — recently spoke with MiBiz about how the bank has responded to the pandemic and the changes it’s driving for the industry.

Fifth Third Bancorp Chairman, President and CEO Greg Carmichael says the pandemic will bring a more widespread shift to digital banking services. COURTESY PHOTO

What’s been the most challenging issue in managing through this time?

Trying to manage through the fact that literally the economy shut down overnight, so to speak, with very little notice. You had families with daycare issues, school issues, you go down the list, and we were trying to keep our operations up and running to service the consumers in a way that was appropriate and consistent with CDC guidelines.

We had to deal with our employees’ family situations, personal situations, those at high risk, and figure out a way to keep our operations open. Our backroom operations and our banking centers never closed. We closed the lobbies, but the drive-thrus were open and we had to staff those. Working through the logistics of those challenges was huge.

Supporting the CDC guidelines where we had to have proper hand sanitizer, facial coverings, plexiglass to separate our tellers — all that took time to put in place. And couple that with the uncertainty. How long is this going to persist? How long are we talking? What type of long-term changes do we have to make? Do we have our vendors and suppliers to supply us, all going through the same scenario? And some of them weren’t deemed essential.

What has been the single biggest change in how you connect and work with your customers?

A lot more of the conversations have shifted to virtual. Up until more recently, a majority of the conversations would be a wealth management adviser talking to a private bank client about their financial needs and planning. Those things were being done virtually and most still are being done virtually. Going into the crisis we needed a lot less drive-thrus and less or smaller lobbies and so forth. With the pandemic, we had to adjust to accommodate longer lines in the drive-thrus and find more capacity in our drive-thru lanes, and adjust to call center volumes with staffing for calls coming in.

What are the permanent changes for the banking industry that will come from the pandemic?

On the consumer side of the house, those who were reluctant to use digital channels and those who would use digital channels for certain capabilities and certain features — ‘Did this check clear?’ or ‘What’s my account balance?’ — had more time on their hands. They were home and their kids were at home who could help them with the technology in some cases. So, you had the high-level adoption of our technology and digital capability. We saw our numbers jump up to 75 percent of all of our transactions going through our digital channels, which is above the 60-plus percent we were running prior to (the pandemic). I think that really sticks because it’s so easy and so efficient for the consumer to use digital channels for those types of transactions and save the in-person for interactions that really involve help to solve complex problems and providing advice to them.

How does that affect your branch network?

That shift is here to stay and I think you’re going to see less foot traffic in our branches. That will equate over time to less branches as that adoption becomes more digital. It also requires banks to enhance their digital capabilities and their sales capabilities and to know their next product for their customers through digital capabilities. So we have to accelerate our capabilities there. 

I have to assume the pandemic has accelerated banking further into the digital age.

What’s interesting is we’ve been investing in these capabilities, but there’s never been a real catalyst to drive adoption until this pandemic came about. The pandemic’s forced adoption of digital capabilities, virtual meeting platforms, and once that adoption was experienced, I think it’s going to stick because it’s that easy and that efficient.

How is the crisis changing how you work with commercial clients?

The big shift there is the continued need for corporations to use their digital platforms their banks provide for doing their banking, and a lot less dependence on small businesses walking into a banking center and using some of the capabilities digitally that banks provide. RMs (relationship managers) are talking to their clients for review of financials (and) problem-solving virtually using WebX or Zoom. That’s going to stick and you’ll see less road time for RMs.

What’s not going to permanently change and remain in place?

What hasn’t changed is it is still a people business. Banking is a relationship business. You hear a lot of bank CEOs say this. Our customers, both commercial and consumer, still want — when they have a complex problem, need advice, have an issue they’re trying to solve, have a dispute on their credit card — to talk to somebody. Or they have an error with their credit bureau, they want that cleared up. They don’t want to use your automated call platform. They want to talk to someone if it’s something that impacts them financially.

If they can’t get a loan processed, or something’s getting hung up or there’s information that they can’t get to, they want to talk to somebody. It’s still a relationship game. The ways in which we handle that relationship continue to evolve and accelerate to digital capabilities.

Thinking back to March, what was the moment that told you just how serious this situation was and that you had to shift quickly?

When we saw New York unfold. Then you started hearing Gov. (Andrew) Cuomo talking about hospitals being overrun, out of capacity, makeshift hospitals, makeshift morgues. When you started hearing that, you said, ‘Oh, God. How many other cities are going to go through that if they don’t react quickly? Other cities that haven’t experienced that level of infection yet, how fast are they going to react and how quickly are they going to have to react to prevent the same thing from happening in their city?’ And then I said, every governor is going to want to be more aggressive here to show they are not being negligent in protecting their state.

I knew when New York started becoming as bad as it was that other states were going to start to react very aggressively across our footprint and that was going to have huge ramifications, and this was going to be a lot worse than people anticipated it was going to be.

How has this crisis changed you as a business leader?

As a bank leader, I spend a majority of my professional hours managing risk, and after 10 years of Dodd-Frank and stress testing our business, we never stress tested for a pandemic. So, as a business leader, being able to adapt more aggressively on the fly and then more holistically thinking about any potential scenario that can impact our business, without leaving anything on the table, I just kick myself saying, ‘Why didn’t we model pandemic?’

How many CEOS had a ‘pandemic’ on their checklist, though?

Nobody. The government puts the stress test in front of us, and not one of them was ever a pandemic.

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