echnology has been transforming the banking industry for decades, but its impact can be difficult to quantify—at least to the outside observer. Banks are reticent to reveal how much they spend on innovative solutions or their return on investment. And it’s hard to uncover which companies they’re partnering with in the tech startup community, as many of these solutions are white-labeled or operate behind the scenes.
Bank Director used a case-study approach to develop two metrics to rate each bank’s technology strategy. The first considers technology expertise, both at the board level and in executive-level staffing. This looked at titles beyond the standard chief technology officer or chief information officer, to consider which banks have brought executives on who are focused on the customer or user experience, digital strategy, data or innovation.
The second piece examines known activities and results by these banks, from new and innovative products that have been released into the market in the past two years, to establishing innovation labs and working with technology accelerators, to known partnerships and investments.
Each bank was scored relative to its regional peers. Regional winners were then scored again compared to each other to determine the overall category winner. Due to this second scoring, the overall winner’s final score differs from its regional score.
The efficiency ratio was not included in determining the impact of technology for the purposes of this category ranking, as so many factors have an impact on it. However, we have included it in the accompanying table, as a bank’s technology initiatives can work to make it more efficient—which can ultimately impact that metric. As you’ll see, a better efficiency score doesn’t necessarily correlate with innovation.
Fifth Third Bancorp topped the technology category overall and in the Midwest. The big regional bank has certainly staffed up for innovation. Tim Spence, Fifth Third’s executive vice president of payments, strategy and digital solutions, was featured in American Banker as “the visionary” on innovation at the bank. The team also includes Chief Digital Officer Melissa Stevens, Head of Digital Lending Ben Hoffman, Chief Customer Experience Officer Katie Liebel and Joel Kashuba, senior vice president of design and innovation. One-quarter of the board has technology expertise, and the bank’s chief executive officer, Greg Carmichael, is a former CIO at the bank and has a degree in computer science.
Support for innovation comes from the top: Fifth Third’s innovation lab, dubbed ONE67 Innovation Center, was established in 2017 to develop new products. It’s located right next to the C-suite, and that support trickles down throughout the organization.
“We believe innovation doesn’t rest on the shoulders of only the innovation team,” says Kashuba. “It is very meaningful to me that [executives have] bought into innovation and our mandate, but what’s even more exciting to me is that it is something that is driven by the curiosity of every member of Fifth Third, and that we have countless partners across the enterprise that we collaborate with.”
Since innovation is all about solving problems, the team starts with the customer—not technology—in mind. “I think of innovation as being customer-centric first, and having empathy for our customers or our potential customers, and the communities that we serve,” says Kashuba. “What are our customers’ definitions of success for their businesses, for their lives, what they’re trying to manage financially.”
That focus on customers’ unmet needs has resulted in products such as Fifth Third’s Momentum app, in which customers can link their debit cards to their student loan servicer and round up their purchases to the next dollar to accelerate the repayment of their loan.
Bank OZK came out on top in the South. Its OZK Labs, which in July 2018 announced a partnership with Google around machine learning, was acquired through the bank’s acquisition of C1 Financial in 2016. Bank OZK launched a new online account-opening platform in 2018, too.
In the Northeast, Webster Financial Corp. topped the category. Twenty percent of its board has technology expertise, and the bank has executives focused on digital banking and the user experience. HSA Bank—a nationwide platform focused on health savings accounts—is Webster’s fastest-growing business line. The online and mobile platform touts a seamless experience for HSA users and their employers, and uses data analytics to improve the customer experience.
Finally, Bank of Hawaii Corp.’s technology strategy stood out in the West. Executives at the bank focus on customer experience, strategy and digital innovation, and one-quarter of its board has expertise in technology. In addition, Bank of Hawaii has focused strongly on branch modernization, and its commercial banking group launched a product innovation lab in 2017.
How They Ranked: Best Technology Strategy
|SCORE||EFFICIENCY RATIO||% DIRECTORS W/TECH BACKGROUND|
|OVERALL WINNER: Fifth Third Bancorp||1.40|
|1||Webster Financial Corp.||1.20||58.2%||20%|
|2||M&T Bank Corp.||2.40||53.4%||5.9%|
|5||Community Bank System||4.00||54%||–|
|1||Fifth Third Bancorp||1.60||51.3%||25%|
|4||Great Western Bancorp||4.00||46.5%||12.5%|
|5||Chemical Financial Corp.||4.40||51.3||7.7%|
|2||South State Corp.||1.80||64%||13.3%|
|5||FCB Financial Holdings||5.00||40.5%||–|
|1||Bank of Hawaii Corp.||1.20||57.3%||25%|
|2||First Republic Bank||1.80||64.2%||8.3%|
|3||Western Alliance Bancorp.||3.20||40.8%||–|
|4||Cathay General Bancorp||3.80||41.2%||–|
|5||East West Bancorp||4.00||41.5%||–|
SOURCES: Bank websites, filings, LinkedIn and other information