Fifth Third Bancorp (FITB) isn't giving up on the small-dollar loan market, Chief Executive Kevin Kabat said Thursday.

Fifth Third this week terminated its accounts with payday lenders, and in January stopped making so-called "deposit advances," amid more aggressive scrutiny of the market by federal regulators. But the Cincinnati company still wants to be a player in the market for small-dollar loan products, as long as it can find a way for the products to pass regulatory muster, Kabat said in an interview.

"We made the decision to move away but that doesn't change the consumer demand for what I would term the small-dollar loan need," Kabat said. "We absolutely think that demand will continue and is real and is significant."

Regulators' recent actions are making it tougher for banks to stay in that market. The Consumer Financial Protection Bureau is finalizing nationwide rules for payday lending, and several banks have discontinued existing small-dollar loan products in advance of the new CFPB rules.

Meanwhile, the Department of Justice's Operation Choke Point investigation into payments-system fraud has forced some banks to cut off ties with payday lenders, even those companies that have valid state payday-loan licenses.

Capital One Financial (COF) and Wells Fargo (WFC) are among the other banks, in addition to Fifth Third, that have ended relationships with some or all of their customers in payday lending, check cashing or other alternative banking services.

If regulators drive banks out of all segments of the market for small-dollar credit, other companies will fill the void, Kabat said.

"[The demand] will get satisfied," Kabat said. "There are nonbanking entities that will satisfy that, and we don't think that's a positive for the consumer in the long run."

Kabat was not specific about the types of products or services Fifth Third is considering. But the company is studying the issue, he said.

"We've got teams working on it to see if there's something substantial [we can offer]," Kabat said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.