Can U.S. Bancorp make its digital cross-selling strategy work?

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What will it take to convert a single-product customer, say a credit card holder, into an across-the-board customer?

U.S. Bancorp in Minneapolis is betting that a heavy emphasis on digital banking, plus some selective branch expansion, will help it cross-sell deposit accounts and loans to consumers outside its traditional markets.

CEO Andy Cecere, under questioning Wednesday from analysts about growth strategy during the bank’s first-quarter conference call, acknowledged other banks have vowed to do the same thing and struggled. However, it may be more possible now because the banking landscape has changed a lot in recent years.

“What's changed over the past few years [is] the capabilities that you can do from a digital platform,” Cecere said. “Historically, you really needed a physical presence to expand the customer relationship. And if you didn't have a branch in that location, or many branches or density of branches, you weren’t able to really expand the relationship.”

Today, two-thirds of U.S. Bancorp’s customer transactions happen in a digital environment, and 70% of the bank’s customers use its online or mobile platforms.

“All those facts allow you to enter a market with this branch-light concept with the digital platform,” he said. “That is different from a few years ago, and I think that's the major change.”

Newly free of a consent order tied to anti-money-laundering compliance, U.S. Bancorp is now accelerating its expansion into four Southeastern states where it has a lot of customers, but no retail presence. Meanwhile, Cecere said, the bank will shrink its overall branch count by as much as 10 to 15% over the next few years as it consolidates in its legacy markets.

It plans to expand its retail franchise nationwide, primarily by targeting customers who already have a mortgage, credit card or auto loan with its digital offerings.

As part of its digital strategy, the company also recently hired its first chief digital officer, Derek White, away from BBVA in Spain, where White led a team of nearly 10,000 employees. He will now lead U.S. Bancorp’s newly consolidated digital team and will oversee its entire digital strategy, from blockchain to real-time payments to artificial intelligence.

“Derek's goal will be to really bring that all together and to our common U.S. Bank sort of vision and theme,” Cecere said.

He offered another metric the bank is tracking to gauge its progress: Among all the loans U.S. Bancorp offers with a digital option, about one-third had been completed digitally by the end of February, compared with 25% a year ago and 21% two years ago.

So far, those are mostly consumer loans, including personal loans, auto loans and mortgages, but it also includes a more recent option the bank launched last fall for small businesses.

But deposits are still a key product it needs to pitch to customers, Chief Financial Officer Terry Dolan told American Banker in a follow-up interview.

“Deposit relationships, especially on the checking side, are still kind of the center of the financial relationship you have [with a customer], and it enables you to do a lot more relationship pricing,” he said. “Those customers are much stickier, and they’re much less price-sensitive. I would say that a big part of [the digital strategy] is around customer centrality and engagement.”

Total deposits increased 1% year over year to $348.1 billion, but like virtually all of its peers, U.S. Bancorp saw the mix of deposits shift. Non-interest-bearing deposits declined 9% to $74.6 billion, while interest-bearing deposits rose 4% to $273.5 billion.

But Dolan described that dynamic as “pretty natural” and said that if interest rates do start to fall at some point, he expects that shift to slow.

“Generally, all deposits are good,” he said. “The alternative is having to fund yourself in the wholesale market or capital market.”

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