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FORBES.COM NOVEMBER 30, 20 19FRANCOVOGTFOR^ FORBESTHETRENDFINTECH50investing in fintechs and funding loans generated by the
newcomers. Fifth Third has a broad deal with Morris’ QED,
which gives it a chance to invest in the startups the VC firm
backs. One of Fifth Third’s earliest QED investments was
in GreenSky, the Atlanta-based fintech that generates home
remodeling loans (some funded by Fifth Third) through a
network of general contractors.
The best of these partnerships provide Fifth Third ac-
cess to younger borrowers, particularly those with high
incomes. In 2018, it led a $50 million investment in New
York-based CommonBond, which offers student-loan refi-
nancing to graduates at competitive interest rates. Similarly,
Fifth Third has invested in two San Francisco-based start-
ups: Lendeavor, an online platform that makes big loans to
young dentists opening new private practices, and ApplePie
Capital, which lends money to fast-food franchisees.
“The thing I’m most envious of, when it comes to the ven-
ture-backed startups that we compete with, is the quality of
talent they’re able to bring in. It’s really remarkable,” Spence
says.
But while Spence envies them sometimes and partners
where he can, he isn’t convinced the neobanks will make
big inroads into traditional banks’ turf. “None of them haveshown that they can take over primary banking,” he says.
He also argues that having physical retail branches is still
important for building long-term relationships with custom-
ers. In a recent Javelin survey of 11,500 consumers, an equal
number rated online capabilities and branch convenience as
the most important factors when deciding whether to stick
with a bank.
Fifth Third has been reducing its overall number of
branches an average of 3% a year, but it’s opening new ones
designed to be Millennial-friendly. These outlets are just two
thirds the size of traditional branches. Instead of snaking
teller lines, there are service bars and meeting areas with
couches. Bankers armed with tablets greet customers at the
door—Apple Store-style.
That raises the question of whether any of the neobanks
will be so successful that they’ll eventually open physical
outposts, the way internet retailers Warby Parker, Casper
and, of course, Amazon have done. After all, it’s happened
before. Capital One pioneered the use of big data to sell
credit cards in the early 1990s, making it one of the first suc-
cessful fintechs. But in 2005 it started acquiring traditional
banks, and today it’s the nation’s tenth-largest bank, with
$379 billion in assets and 480 branches.FOMO
Tim Spence, Fifth Third’s chief strategist, in the regional bank’s downtown Cincinnati headquarters. Most of his neobank competitors are losing money, but
“the lesson... learned from Facebook and Amazon and Google... is that the internet is amenable to a winner-take-all market structure.”