- Fifth Third, a long-standing bank, recently acquired Rise Money as part of their history of innovation
- Fifth Third's embedded payments business operates like a software company within a bank
- Rise Money was chosen for its technology that can connect different layers of the bank's infrastructure
- Fifth Third has made several other acquisitions in different industries to meet specific client needs
- The acquisition of Rise Money will help Fifth Third standardize and scale their embedded payments business
- Fifth Third focuses on finding the right job to be done for their clients and determining the best way to deliver it
- The bank has industrial-grade capabilities but is also agile enough to move quickly.

- Fifth Third Bank has a history of innovation, including launching the first network ATM in the US in 1977.
- They continue to invest in proprietary capabilities and unique experiences for their customers.
- They also consider partnerships and acquisitions to bolster or extend their product line.
- Major trends in the banking and payments landscape include increased diversification of risk in provider relationships and the pace of innovation in the FinTech community.
- The market is still in early days for FinTech, and the future of financial technology is exciting.
- There are risks on the horizon, such as regulatory focus on preventing collapses like Silicon Valley Bank and the need for new risk management capabilities.
- Traditional banks can learn from Fifth Third's example of product development, innovation, and finding the right balance between competition and cooperation.

- The speaker believes that there is a lot to learn from each other in terms of product development, innovation, and problem-solving in the fintech industry.
- Fintech has brought positive change to traditional banks in terms of how they react to industry developments.
- The speaker emphasizes the importance of learning from fintech competitors and clients, rather than engaging in a race to the bottom.
- The relationship between fintech and traditional banks will not be binary, with some fintechs being absorbed into banks while others remain independent.
- Acquisitions will continue to happen as companies seek to enhance their offerings and revenue streams.
- The speaker encourages listeners to keep an eye on the embedded payments team at Fifth Third, as they have exciting developments coming in the future.

- Fifth Third, a long-standing bank, recently acquired Rise Money to enhance their embedded payments business
- Rise Money was chosen for its technology that connects different layers of the bank's infrastructure
- Fifth Third has a history of innovation and has made several acquisitions to meet client needs
- The acquisition of Rise Money will help Fifth Third standardize and scale their embedded payments business
- Fifth Third focuses on finding the right job to be done for clients and determining the best way to deliver it
- They continue to invest in proprietary capabilities and unique experiences for customers
- Major trends in the banking and payments landscape include increased diversification of risk and innovation in the FinTech community
- Traditional banks can learn from Fifth Third's example of product development, innovation, and finding the right balance between competition and cooperation
- Acquisitions will continue to happen as companies seek to enhance their offerings and revenue streams

You're listening to the IPA pod, a podcast by the Innovative Payments Institute.

Fifth Third's recent acquisition of Rise Money is just the latest development in a long history of innovation for the bank.

While it's easy to think that innovation only comes out of startups, industry experience often means innovation experience.

I'm Ben Jackson, and in this episode, I talk with Tom Bianco, General Manager of Embedded Payments at Fifth Third, about how the company approaches innovation.

We discuss their approach to the build-buy-partner question and how fintech products and services connect to all the layers of a traditional bank.

This podcast was recorded on June 1st, 2023.

Things may have changed by the time you hear it.

In this episode, I'm joined by Tom Bianco, the General Manager of Embedded Payments at Fifth Third.

Thank you for having me, excited to be here.

And today we're talking about Fifth Third's deal to buy Rise Money, but to put that into context, can you start by giving us a quick overview of Fifth Third and the areas that the company focuses on?

We have just under 210 billion in assets and we have over a thousand banking centers across the country.

Our footprint really stretches from the top of Michigan to the bottom of Florida, to the east in North Carolina and to the west of St.

So that's really the fifth third banking footprint.

And then we have commercial banking offices spread throughout the country.

So I think when we talk about Fifth Third, the size, the scale, the presence of the company, it surprises some people.

And then when we also dig into our history of innovation, that's where you get even more kind of curious looks and then really thoughtful conversation around, well, we didn't know that Fifth Third Processing Solutions became Vantiv, which then became WorldPay, which then became WorldPay by FIS.

So we have this deep and rich history of innovation.

And when you think about the embedded payments business here at Fifth Third, this is a group that was spun up roughly 18 months ago, and we brought together different groups within the bank.

So a relationship management team out of our Chicago middle market region who focused on third party payment providers or TPPs with a big focus on the payroll space.

We brought together our BIN sponsorship product team, and then we've invested really heavily in our client success organization, our product organization, our technology organization.

And so when you think about the embedded payments business here at Fifth third, it really is built like a software company that's operating within the confines of a top 15, top 20 bank in the United States.

It's been a really fun journey over the last 18 months.

We're super excited about the rise acquisition, bringing that talent, bringing that team into the fold.

And we think there's really big things ahead of us in terms of growth, new product innovation, new servicing models, et cetera.

With that all in mind, then can you give us a quick description of what Rise Money is and why Fifth Third decided to buy them?

We'll start with just the kind of construct or the framework that we use with the payments business.

And somebody asked me to explain to them embedded payments like they were a five-year-old.

And so the 1 thing that I latched onto is I think every five-year-old loves cake.

So we've been using a cake analogy in some conversations to bring a somewhat esoteric or nebulous concept to life.

And if you think about the products and the capabilities that we deliver and how they manifest in our clients product.

The cake analogy works in that the frosting would be the client or the customer end-user experience.

The next layer of cake, Think of that as our client or our prospects product infrastructure.

And then when you go below that layer, that's where you have the embedded payments platform.

So that's people, technology, process, controls, etc.

And then below that you have the base of the cake or the fifth third core infrastructure.

And the embedded payments business today is on pace to generate around 130 million in total revenue this year.

And when we looked at Rise and did a market assessment a couple years ago to say, well, what's the right way to build the right platform for this business?

We looked for something that could traverse those different layers of cake and help connect the frosting to that base layer or the core banking infrastructure of Fifth Third.

And so when we looked at Rise, we saw technology that would allow us to traverse those layers and an easier model of integration for our clients to consume or to connect into those banking services that Fifth Third provides.

So that's really the embedded payments product construct discussed in the context of a piece of cake.

I mean, had you had a bite at the cake before you decided to buy it?

I won't get into that, but I will say the fifth, third embedded payment name is pretty well connected and the FinTech circles, and so we knew some people at rise and so when the conversations first started, it was less of a hi, nice to meet you.

So it wasn't necessarily a situation like we see sometimes where a bank as an outside vendor that they decided to incorporate, This was more, you guys were actively looking for new things to bolt onto the existing infrastructure.

I don't know if actively looking is the right way to frame it.

It was more of there was an opportunity in the marketplace.

We have really strong product development and management.

And we looked at the RISE platform as the way to deliver that next evolution of the business, so to speak.

And I certainly don't want you to give away any sort of strategic plans or anything like that, but can you tell us a little bit about what the next steps might be in terms of developing business in the wake of this acquisition?

So we'll have more to come on that in the next couple weeks.

We'll have a little more thoughtful position on product development, product scope, the services that are available on this platform.

But The way that we think about the RISE platform is, this is a way to take the next instance of the embedded payments business, standardize the platform, streamline the client interaction model, and really scale in a more consistent pattern, the products that we have or the products that will develop for the future.

Now, thinking about this acquisition and thinking about the description that you gave us of Fifth Third, I want to branch out and go a little broader because obviously Fifth third is a bank that has done a lot of innovation.

They, you guys think a lot about sort of innovation and this deal isn't a one-off for fifth third, right?

You guys have made at least 4 deals that I know of since 2021.

So there's Rise, there's Big Data LLC, which was healthcare, Provide, which does work with doctors and Dividend Finance, which is loans for home improvement.

How do you decide now is the time and this is the opportunity that we want?

And getting back to like the innovation DNA of the company, we're constantly looking to invest in technology to empower our customers and clients to do the things they need to do better, faster, with more control and more efficiency.

And so that could be a managed services solution where we're providing process optimization for our commercial clients, and that's specific to an industry vertical like healthcare.

That could be in the lending space where we know there's very special needs in terms of physicians, veterinarians who are coming out of college or coming out of school who have certain amounts of debt and they need special financing tools.

So we look at the fit in terms of what jobs to be done, does it deliver for our client base?

And what's the right opportunity to deliver that job?

Is there ability to make an acquisition and potentially compress the time to market and the speed to revenue.

So I would say we're pretty sharp when it comes to finding the right job to be done and then finding the right company or the right product to fit that job to be done and then determining the right way to deliver that jobs to be done.

So we talk pretty extensively around jobs to be done.

We frame our product roadmaps and jobs to be done.

And we really focus in on what is the customer or client job, What's the right way to deliver it?

And then how can we go about delivering that job in the best way for our shareholders, our employees, our clients?

And I think just being the size we are and then having the capabilities We have, we're in that position where we're big enough to have really industrial grade capabilities, but we're at the right size where we can move pretty quick.

So we talk about how can you move like a Boston whaler versus how do you move like a cruise ship?

Although it's something we just talk about all the time.

We have to be agile on how we approach the marketplace because we don't have the $3 trillion balance sheet.

And when you look at the innovation process, Typically when people talk about banks innovating, they described it as it's always a built by partner choice, right?

You either build it internally, you buy capability or you partner.

And it looks like as an outsider that Fifth Third has chosen by as its primary path.

But I was doing some research for this podcast and earlier this year, Fifth Third was named a fortunes list of America's most innovative companies.

And I was wondering if you could go back a little bit, because you talked about the history of innovation does Fifth Third when it thinks about those jobs to be done, for example.

Do you guys also think about things like, well, maybe we should build a capability inside because obviously you've done it before, or maybe we should partner in, can you talk about how you do that calculus of, do we want to go out and buy something?

Do you want to build something inside because it makes more sense?

Cause it fits better with our integration or do we just want to partner up because we need to get a job done quickly.

Not sure you wanted to go that far back, but that's where we'll start it.

So in 1977, Fitthird launched the Genie Network, which was the first network ATM in the United States.

And so when we say we have a history of innovation, you know, quite literally we do.

So 1977 to 2009, when we spun off Fifth Third Processing Solutions that again became Vantiv, WorldPay, WorldPay by FIS.

And so I think some of the recent headlines, which are publicly available, they're the ones that people are able to pull from.

But if you dig deep into what we've done over the past couple years on the innovation front, we've launched Fifth Third Momentum Banking, which is kind of a hybrid, best of breed between FinTech experiences like the Dave and the Chimes of the world and the capabilities of a bank with 1000 financial centers across the multi regions of the country.

So we've done a lot of proprietary capabilities.

They may not get the credit that some of the acquisitions make because those are splashy or headlines for whatever reason, but we're continuing to invest in proprietary capabilities, unique experiences for our consumers or for our commercial clients.

And then when we have an opportunity to either bolster a product line or to extend a product line or to drive diversification and a revenue stream, that's where you look at an acquisition.

If we don't have the capacity or the skills or the expertise and truly to develop and deliver.

And so you'll see more of the headlines on the acquisition front, but there's a whole group of people, very talented, highly capable experts in their field that are continuing to invest in proprietary capabilities, technologies, experiences, process improvements at the bank to serve the broader customer and client base at Fifth Third.

Because you went a little further back in time maybe than we planned.

I'm going to go a little further out and talk a little bit bigger picture now and expand a little.

When you think about all of the things that you guys have worked on and you think about all of the ways in which you're innovating, obviously that was driven by what you see in the marketplace.

And I wanted to ask you, what are the major trends and the currents in the marketplace or the market forces that you think are going to shape banking and payments going forward?

We obviously think quite a bit about this.

It seems to be like whenever we have our weekly leadership meeting within embedded payments, there's always a news article or a pertinent topic that we discuss.

Sometimes at length and sometimes there's a quick response or reaction.

But I think there's a few key currents that are taking place within the banking and payments landscape from the embedded payments.

First and foremost, when you have a situation like what happened with Silicon Valley Bank, that experience that companies went through, where's the money, how much money is available, when will we have access to it?

I think that kind of primary banking or primary processing partner relationship has been changed and you'll see more secondary processing relationships, tertiary for maybe some of the really large complex programs.

But I think that we're going with 1 provider and this is our provider.

I think the executive teams and potentially the boards of these companies who have these large complex payment programs or financial product programs, they're going to ask for more diversification of risk in the provider base.

So I expect to see more secondary processing, depository relationships.

So I think that's point number 1, and I'm curious to see how that 1 plays out.

I think point number 2 is the amount and the pace of innovation that's taking place in the FinTech community.

And I know there's certain headwinds in the FinTech kind of industry right now in terms of valuation or funding, but it still feels like we're early days in FinTech.

It's going to be interesting to see how the investment cycle plays out, who will achieve profitability, who will achieve positive cashflow, who will prove product market fit, and how some of those players will shake out over the next couple of years, I think is going to be very interesting.

I think in times like this, companies come out stronger, those with a really strong strategy, with a really strong product, with leaders who know how to handle the turbulence.

The companies that come out will come out stronger and they'll be in a better advantage position and so I'm going to be watching to see who are those players that come through whatever cycle we're going through right now.

I mean how will the market react once we get on the other side.

Yeah it's definitely a wild time in the FinTech space.

And it'll be interesting to your point to see how many of these guys that have come out and done well at things like gaining customers, how they deal with the need for, well now we have to be profitable.

Well, I'll take you back a little bit deeper in time, not as far back as 1977, but I started my career out on the West Coast with Wells Fargo.

And so in the early 2000s, right, that's like post.com bubble, And there was some hesitation or trepidation around investing in technology back then.

Are people really going to adopt this from the business standpoint?

What products need to be put on the internet.

This is kind of pre-digital days and just straight up internet product strategy and internet platform development and all that fun stuff.

And so I try to think back to those times right now and there's investments or strategic investments that could have been made in things like QR codes, NFC chips, single use accounts for cards.

And so at the time, it's like, well, maybe now's not the right time, but the time horizon on scaling some of these new financial technologies can be quite long.

And so you have to have conviction in this space.

I'm very curious to see how the market evolves.

And I'm excited to see what those next innovations are.

I think when you have Open technology and you have the ability to really connect into a company in a streamline consistent way for multiple products services capabilities.

Then it becomes a question of how big can you dream and how quickly can you innovate to take advantage of a market opportunity?

So we still think it's early days in the FinTech evolution and I continue to be excited about the future of financial technology and what kind of innovations our clients and our prospects will bring to the table.

With that in mind though, banks are in the business of risk management, probably more than most other industries.

Whenever you're facing a conversation around the debt ceiling, How can you not worry about the more meta risks that sit out in the environment, in the economy?

So I think there's a few kind of key things that will maybe change in the future from a risk management standpoint.

I think the regulators will sharpen their focus on some things that happened as a result of SVBs collapse.

So I think you'll have some people who will look at what happened at SVB and say, okay, we can't let that happen again.

I think we've already started to see some movement on that front.

I also think on the risk management side, you'll see a lot of investment and new risk management capabilities.

So I expect money 2020 other industry events on the board members of IPA.

I imagine they will be talking about new risk capabilities and new risk solutions to help prevent things like AML risks.

And then I expect on the risk management front that the banking risk provider, so banking concentration risk will become top of mind for our clients and prospects.

Looking at the industry then there's a lot of talk about, gee, our traditional bank's going to be able to keep up and our FinTech's going to sort of reshape the industry.

Do you think that there's something that traditional banks can learn from Fitthird's example about how to operate in this rapidly changing environment?

I think there is a lot that we can learn from each other in terms of product development, innovation, how to creatively solve problems, and how to draw the right boundaries of competition or cooperation.

And I think the way that we've thought about the world, at least within embedded payments, and I'm talking about my views in the context of embedded payments, if we're trying to anchor our success to that of a fintech in terms of product development, innovation, growth, you have to understand how they're organized and you have to organize yourself accordingly and figure out what you can glean from them in terms of technology infrastructure.

How do you look at a client or customer need?

So I think FinTech as a whole has pushed a lot of positive change on banks in terms of how we react to things that are happening in the industry.

And again, Fifth Third Momentum banking, understanding what's going on with Dave and Chime.

Okay, what do we need to build into our kind of momentum banking offering to deliver those capabilities so you have the best of both worlds?

I think those are good, positive patterns of competition that I hope continue to exist.

I like looking at some of our clients and some of our competitors, EPI guides and their product documentation and understanding like, okay, this is how they're thinking about the world.

Okay, this is how they're marketing this product.

As long as you're looking at it in the positive lens of what can I learn from this FinTech or what can I learn from this new product, then I think that's a positive?

If you're saying, I'm going to compete with them one-on-one and we're going to have a race to the bottom, I don't think that's the right angle.

I think banks and fintechs can coexist, should coexist, but it has to be very clear what the rules of that coexistence is or what that partnership is in terms of compliance, risk management, customer interaction, economics, all of those things that we take for granted when you're working with the FinTech, sometimes they're not always top of mind.

And do you think that the FinTech industry will eventually be absorbed into banks?

Is it going to be a situation where a lot of these guys get brought into the traditional banking structure?

Do you think that there's always going to be this kind of side by side relationship where there's going to be people spinning up new products that maybe need banks, but aren't necessarily banks themselves.

That's going to be an interesting evolution.

You won't have like all FinTech comes into banks, all FinTechs remain independent.

I think what you'll continue to see is companies, FinTechs, banks, investing in the right products and solutions and capabilities for their bases.

And if a FinTech has a compelling value proposition and it can be something that's available for sale.

I think you'll see companies continue to make acquisitions to bolster their offering and to again bring differentiation to the revenue stream.

But I think there's some fintechs who truly have kind of bank, charter, or licensing aspirations.

And those are gonna be curious stories to see how they play out.

It will be interesting to see how this develops.

I think that's all of my questions, but is there anything else that our listeners should keep in mind to understand what Fifth Third is doing and how it approaches innovation?

The only thing I would ask our listeners is keep your eyes on the embedded payments team here at Fifth Third.

Like I said earlier, we'll have some new stuff that will come out in the marketplace over the coming weeks and months, and just keep your eye on us.

We're doing some really exciting stuff and we can't wait to share it with the market.

Well, I will definitely be 1 of the ones paying attention.

So thank you very much for taking some time here with me today and we look forward to seeing what comes in the future.

Thank you again to Tom for discussing Fifth Third's approach to innovation in the changing payments market.

The IPA would also like to thank our member sponsor, NetSpend, for helping to make this show possible.

To stay on top of the evolution of payments, Be on the lookout for our Summer of Learning webinar series, where we will have experts tackle trends and topics facing the industry.

Also, in September, we will once again hold our annual Compliance Boot Camp in Chicago.

Learn more about both of these at our website, IPA.org.

Also, remember to subscribe to this podcast and follow us on LinkedIn and Twitter to stay up to date.

Until next time, I'm your host, Ben Jackson.

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IPA Payments Pod - Fifth Third’s Innovation Layer Cake