Why Fifth Third is Getting Serious About Crypto and Stablecoins
While Fifth Third strategist Ben Hoffman says he welcomes new technologies and innovations, he's wary about 'shiny new objects' that could take the bank off-mission. However, he sees crypto as an exception — a new tool that meshes with the bank's longstanding purpose.
By Steve Cocheo, Senior Executive Editor at The Financial Brand
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Leading-edge technology can be a siren song for bankers, but Ben Hoffman argues it’s critical for banks to maintain a firm fix on what they ought to be doing.
"Our customers have a knowable set of needs," says Hoffman, chief strategy officer and head of consumer product at Fifth Third Bank. "They need to get paid. They need to pay others. They need to save for large purchases. And they need to secure their financial positions and, ultimately, their legacy for future generations."
How those needs can and will be fulfilled may change, but Hoffman doesn’t see the essential roles of banks evolving that much. "There are customer jobs to be done, and that list goes back to the Medicis. And it will be the same 200 years from now regardless of what the technologies, social structures, and political environment are like."
Hoffman thinks this kind of long view is critical to strategic thinking. Planning on a time frame as short as 18 months, tied to some evanescent trend, is dangerous.
He isn’t arguing against change and innovation, but against confusing them with the industry’s roster of activities.
"Our job is not to radically reinvent what it is to be a bank," says Hoffman in an interview with The Financial Brand. "Our job is to better meet customers’ needs while maintaining attractive returns for shareholders."
Given Hoffman’s skepticism about innovation-for-innovation’s sake, it’s initially somewhat surprising that he and Fifth Third are nonetheless digging hard into the edgiest of edgy techs: cryptocurrency and digital assets.
What Appeals in Crypto, and What Merely Beckons
That very morning, he’d taken part in a 7:30 a.m. meeting of Fifth Third’s crypto working group. He says this is an area the bank, a growing power in payments, especially on the commercial side, has been studying for some time. Long discussions have gone on right up to the board level.
"We’ve had IT teams building things, not to put into production, but to help us understand the technology and what it will take to operate it or to work with vendors in this space," says Hoffman.
He believes that with the regulatory changes that have already been made under a crypto-friendly Trump administration, and more potentially to come out of Congress, "we’re going to be in an environment in which there’s a bigger role that banks can and therefore should play in the crypto space." (Legislative progress could stall depending on how controversies about Trump family interests in crypto influence the debate. In May pending stablecoin legislation, though bi-partisan, hit at least a speed bump over Democrat’s demands for a tougher regulatory approach.)
Fifth Third is "very bullish," he says, on using stablecoins as a payments rail. He says no one is a fan of the banking industry’s traditional correspondent payment system.
"If stablecoins riding crypto rails can get money moving faster, cheaper and more securely around the world, we should be using that technology," says Hoffman. "There are some very promising use cases, and we’re studying those and talking to our clients about how to we can enable success for them leveraging such technology."
Hoffman qualifies this interest by explaining that there are some facets of crypto that "feel more speculative." He says it is helpful to go back to the idea of customer jobs as a touchstone for what should and shouldn’t be done.
"There are things about crypto that feel like they have more to do with entertainment than they have to do with the jobs banks are entrusted with supporting," says Hoffman. He’s thinking of aspects of crypto like "NFTs" — non-fungible tokens. These are unique digital identifiers recorded on a blockchain that serve to certify ownership and authenticity of both digital and physical assets of many kinds.
Hoffman says banks could work in that area, providing relevant services such as NFT wallets. "But it feels further away from our core purpose than enablement of seamless, secure and cheap money movement, for example," says Hoffman.
When in doubt, go back to what gets the basic customer needs filled, Hoffman insists. In the absence of a cataclysmic event, he adds, banking doesn’t need the innovation equivalent of a Holy Grail.
"Stay focused, do good work, and deliver," he says.
Read more: Digital Wallets Increasingly Dominate Payments, But Cash Maintains A Stubborn Toehold
How Fifth Third is Approaching GenAI and Other Forms of Artificial Intelligence
So what about that other revolutionary tech, AI? The bank’s adoption of artificial intelligence has a practical, rather than an experimental, bent, as described by Hoffman.
"The technology is so powerful, and it’s understood well enough that we could be developing use cases for many, many years before we start running into boundaries," he says.
Hoffman explains that the bank comes at AI the same way it has treated technology from the internet to cloud computing to everything that is part of society’s "march toward digital" as complementary to human experiences.
While there are fewer such experiences in banking today, "they are that much more important," says Hoffman. Even as Fifth Third spends capital and human effort on understanding and implementing new tech, "we are equally investing in branches, hiring, training and more." This includes Fifth Third’s massive push to establish a major physical presence in the Southeast. The bank’s Decision Science Group, which comes under Hoffman’s umbrella, developed computer modeling that informs branching decisions made in that multi-year wave.
Hoffman feels there is much use left to exploit in other forms of tech innovation and in other forms of artificial intelligence that the bank has already adopted. He doesn’t want to leave potential behind in the zeal to jump on the new.
Read more: Inside Fifth Third’s Southeast Expansion Strategy
As he describes it, the pace is deliberate, moving forward with risk controls and other governance measures in place. The bank spent a year building an AI risk management framework ahead of enabling any live use cases, per an account in its annual report.
As the bank continues to move forward with AI, it looks at it in four work streams, according to Hoffman. They include:
• AI for employees — applications that improve worker productivity.
• AI for the engineers — applications that save time and effort for tech staff, such as producing the first drafts of code, "automating a lot of the work that the best engineers don’t want to be spending their time doing."
• AI for the bank — improvements to processes. One example is using GenAI to automate the notes taking and reporting that call center employees fulfill after each customer contact.
• AI for the customer — an effort to build better products and better customer experiences.
Hoffman sees a key application for the future here in chatbots serving bank customers.
"The traditional chatbot infrastructure forces the user down very linear paths," says Hoffman. Often, the flow resembles that of the interactive voice response systems that chatbots generally supplant. The chatbot "keeps moving you down the tree."
"In a GenAI world, you can move a lot more dynamically across the capabilities that exist in your chatbot," says Hoffman. "You can return information in a way that’s far less stilted and in a far more contextual, conversational way for the customer."
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