Fifth Third Bank Analysis
Consumer banking also known as retail banking, provide services like transactional accounts, debit cards, mortgages, credit cards, savings and personal loans to the general public. These services are different from the services that banks provide to the big corporations or other banks. Banking system under which these type of services are provided is commonly known as wholesale banking. Consumer banking is different from commercial or investment banking. In some banks, only a department or a division deals with the general public.
In the United States, the term commercial banking is used for a bank just to make that bank distinguish from the investment bank. Glass Steagall Act that was made after the great depression restricts the traditional banks to do only banking activities. As this act restricted the role of normal banks, it also restricted the investment banks to do activities that are only limited to the capital market. This distinction was reversed in 1990’s (Tulkens, 1993). The term commercial bank is also referred to a division of the bank or a whole bank that only deals with the loans and deposits from the large business and organizations, as compared to the general public.
Consumer banking is defined as the banks that provide financial and banking services to small-sized firms along with medium size firms as well as to the individuals. Today these banks are not only a bank that has the physical presence in the streets of every city, but these banks have provided mobile as well as internet services to the people on their mobile phones.These types of activities have provided value addition to the consumer or retail banking. Here is a graph that statistically shows how much digital banking has increased in the over the period of five years (DW, 2017).
No of users in millions
As the world is progressing, there came a concept of banking that runs through internet services and saves the bank from the costs of physical structures, staffing, plastic cards production, call centers and the cost that banks have to bear for the maintenance of their database. Consumer banks mainly offer two type of products that are financial services and loans and savings. Services on saving accounts are a deposit account, current account, term savings and individual accounts while the services that they offer on loan products are: credit cards, overdraft, mortgage loans and personal loans. Major financial services that these banks provide are life insurance, health insurance, general insurance, endowment insurance, pensions, trustee services, wills and money transmission, stocks and shares, investment funds, unit funds, and foreign exchange (Johnston, 1997).
As the time passes and advancement in the tech world, we are seeing that our live has been made much easier. Now for the banking activities we don’t have to go to the bank and now there is no need to stand in the lines waiting for turn so that we make any banking transaction or can deposit/ withdraw our money. Advancement in the tech world has allowed to do banking transaction through our smartphones. Mobile banking is a revolutionary thing through which we can do payments and do other banking transactions thus making our life more convenient. A study shows that majority of the mobile banking users in the United States are adult i.e., of the age of 18-29. Here is the graphical representation of the data (DW, 2017).
Share of Respondents
The traditional retail banking system is now in danger as more and more people are getting use to with the mobile banking system for their banking transactions. A recent study shows that more than 61% people of United States are using their smartphones for banking transactions out of which around 48% are using different online banking apps to conduct their banking activities (Siddiqi, 2011).
Most of the consumer or retail banks provide special bonuses to the consumers if they open up an account in their with a specific amount of money. Banks do these type of activities because their ultimate goal is the maximum number of potential and existing customers (Hubbard, 1995). Banks assess the worth of their customers when they fill up the form for credit cards to get a new credit card or when an applicant applies for the opening of a new account.
Consumer banking has three major functions that are as follows (Siddiqi, 2011):
Different banks offer credits to their clients at different interest rates which help them in purchasing and it also includes loan and mortgages. Giving credits to the clients makes the economy more liquidate.
Everyone does not spend every penny he/she makes. People have the habit of saving money to make sure that they can get through every situation if they have saved at their back. For such type of people, a bank is a safe place for their money to be deposited. Banks offer an interest rate to the people who deposit their money in the bank as a saving account.
Consumer banks offer services to the consumers to help them manage their money through cards and accounts which help the consumers to do transactions anytime and at anyplace.
Following are the types of consumer banking (Kleimeier, 2004):
These banks provide services to the customers who have the higher level of assets and income and have high net worth.
Community development bank
These banks provide services to the people who have the low level of income or moderate level of income.
Postel saving banks
These banks provide services to the people who don’t have direct access to the banks. These types of banks are convenient and safe to deposit money. These banks provide services to the lower class of society.
Banks raise funds from commercial depositors and retail depositors to lend mortgages to the customers. Then these banks provide mortgages to the customers over a defined rate of interest.
Fifth Third Bank is a US-based bank that is headquartered in Ohio and is a subsidiary of Fifth Third Bancorp. The main businesses of this firm are to provide services like consumer lending, commercial banking, payment processing, branch banking, title insurance, investment advising and investment banking.
The unusual name of this bank came into being as a result of a merger between Fifth National Bank and Third National Bank. Third National Bank in comparison with Fifth National Bank was a senior partner. The name for the bank after the merger was a big confusion and it was changed many times until March 1969 when finally it was decided that the bank will be named as Fifth Third Bank.
In 1999, Fifth Third Bancorp acquired biggest thrifts in the United States named as Enterprise Federal Bancorp Inc. This bank also acquired Bank of Ashland and its mother company Ashland Bankshares Inc. In 2000, This corporation also purchased Old Kent Bank which gave this bank a big chunk of customers and more than 300 banking centers that were working in their full capacity. In 2007, this group acquired R-G Crown Bank, which gave the boost to the banking sector of this group by adding three branches in Georgia and 30 in Florida. Moreover, in 2007, they also acquired First Charter Bank. By acquiring this bank, the group entered in the market of Atlanta with two branches while capturing 57 branches in the market of North Carolina (Seiford, 1999).
In January 2007, the group came under a controversy that it saves the data of its customers to some other organization. An article was written in The Newyork Times which stated that this group is working with some organizations that use their data to reach to the customers and this bank is with all its will providing all the data to these companies and receiving a handsome amount against this. An investigation was started on this rumor, but nothing was proven against the bank.
Retail banking or consumer banking is getting popular since its existence. These banks are different from commercial and investment banks. These banks provide loan and mortgage services as well as deposit and saving services. A shift has been seen in the recent years in the retail bnaking system. Traditional retail banking is now shifting from building to mobile apps. Most of the people are now using their smartphones for banking activities like for the payment of bills and other online transactions. Fifth Third Bank is gaining popularity since its existence currently is has a big name in the retail banking industry. This industry became more popular since they have introduced mobile and internet banking services so that the customer can make transactions anytime sitting anywhere in the world.
Hubbard, R. G., & Palia, D. (1995). Executive pay and performance evidence from the US banking industry. Journal of financial economics, 39(1), 105-130.
Johnston, R. (1997). Identifying the critical determinants of service quality in retail banking: importance and effect. International Journal of bank marketing, 15(4), 111-116.
Sander, H., & Kleimeier, S. (2004). Convergence in euro-zone retail banking? What interest rate pass-through tells us about monetary policy transmission, competition, and integration. Journal of International Money and Finance, 23(3), 461-492.
Seiford, L. M., & Zhu, J. (1999). Profitability and marketability of the top 55 US commercial banks. Management Science, 45(9), 1270-1288.
Siddiqi, K. O. (2011). Interrelations between service quality attributes, customer satisfaction and customer loyalty in the retail banking sector in Bangladesh. International Journal of Business and Management, 6(3), 12.
Tulkens, H. (1993). On FDH efficiency analysis: some methodological issues and applications to retail banking, courts, and urban transit. In Productivity Issues in Services at the Micro Level (pp. 179-206). Springer, Dordrecht.