Pandemic has put a premium on speed, Citizens CEO says
The coronavirus pandemic and resulting slowdown in branch traffic accelerated consumers’ adoption of digital banking technologies by as much as three to four years, according to Citizens Financial Group CEO Bruce Van Saun.
In the long term, that will mean that banks need to digitize as many of their customer-facing applications as quickly as possible, Van Saun said in an interview with American Banker this week. As an example, he described how the Providence, R.I., company put together teams from across the organization to build a platform for originating loans under the Paycheck Protection Program, condensing what would normally be a six-month project into two weeks.
“There’s a real premium on clock speed,” said Van Saun, who is also the chairman of the $180 billion-asset company. “It makes you think, if we were that good on [PPP], how can we extend that to many of the other things we’re doing today?”
In the interview, Van Saun also discussed how Citizens is bringing employees back to work, why banks need to be flexible in working with customers, what impact the coronavirus outbreak will have on the financial services landscape and how the company is responding to recent protests over racial and income inequality.
Citizens began bringing employees back into its offices a few months ago and Van Saun said that when the company initially reached out to its staff to gauge interest, over half its employees said they’d like to get back into the office. The company has begun bringing employees back on a voluntary basis. Only about 25% to 30% have actually returned so far, though.
Van Saun said he expects more to return to the office after Labor Day, but he acknowledged that pre-existing health issues, anxiety and child care challenges could keep some employees working at home longer.
“I think we’re getting a good benefit from having enough critical mass of people who come in, enjoy coming in and see the upside in that and then the other folks still working remotely are benefiting from that,” he said. “We have to do it safely and so far we feel we’re threading that needle.”
While Van Saun said he generally feels good about how the company has performed during these last two tumultuous quarters, his two main concerns right now are revenue pressures and helping borrowers to make it to the other side of the pandemic. Citizens’ fee businesses have helped to offset the revenue pressures brought on by low interest rates and lackluster loan demand.
Meanwhile, he’s urging his bankers to be flexible in working with consumer and business borrowers and not be so quick to write off loans.
“Trying to get that right is something I’m worried a little bit about,” he said. “If we believe in the business model and the management, let’s take a little risk and go long and let them hold the reins a little longer and see if they can make it through.”
He said assisting customers as they cope with the current crisis will pay off for Citizens later.
“You want to try to help those borrowers get through this time period, because they’ll remember that. They’ll become loyal customers for the next decade or decades,” he said.
Van Saun said he is less worried about competition from fintech upstarts. While the accelerating pace of digital adoption would seem to suggest an opening for challenger banks and online lenders, he said that banks have both the resources and tech know-how to handle any threats from insurgent fintechs.
If banks "keep investing in the customer experience, providing advice and solutions that really work for their customers, then the customer has no reason to go anywhere else,” he said.
Citizens is investing heavily in its digital transformation. It launched a national online bank, Citizens Access, in 2018 and since then the digital arm has accumulated roughly $6.5 billion of deposits and gained customers in all 50 states.
Executives have said they intend to expand the digital franchise, which currently offers only savings accounts and CDs, to include checking accounts and a bundled product offering later this year or early next. The bank also plans to extend its merchant finance partnerships, like those it has with Apple and Microsoft, in which it provides point of sale financing for consumer electronics such as phones or gaming consoles.
Those point of sale loans carry a 0% APR, but Citizens receives a fixed portion of overall sales from its merchant financing business. That and other fee businesses, such as capital markets and mortgage banking, should help to offset revenue pressures in a low interest rate environment, Van Saun said.
Those revenue pressures, along with residual charge-offs, could eventually motivate some banks to consider merging, he said. But he also expected that M&A activity would be muted in the near term.
“Typically you don’t see consolidation in the middle of the crisis, because no one knows what the credit problems are on the other company’s balance sheet,” he said. “You kind of want to wait until you get to peak charge-offs and it becomes a little more clear where the path of the economy is going.”
Responding to civil unrest over racial inequality, Citizens has given money to social organizations and invested in a number of other new initiatives, including a small-business grant program for minority-owned businesses.
Internally, he said the company has also embarked on a listening tour to hear the concern of its Black and minority employees, he said.
“If you haven’t walked in their shoes, you don’t know some of the stresses and what they have to tell their children about where they can go and where they can’t go," he said.