Online Lenders

Fifth Third offers customers student loan refinancing with CommonBond

  • Student debt is a major issue for many banking customers.
  • Fifth Third Bank teamed up with CommonBond to provide refinancing.
Fifth Third offers customers student loan refinancing with CommonBond

It’s now six months after graduation and 2018 grads will have to start paying back their college loans. The average student will graduate with $39,400 in college debt, up 6 percent over last year.

Customers of Fifth Third Bank will get some help as the Cincinnati-based firm has introduced student loan refinancing. The product was launched after the bank analyzed how its customers were coping with student loan debt.

“We travelled around our footprint and sat at kitchen tables to conduct ethnographic research with our customers,” said Ben Hoffman, head of fintech investing and partnerships and co-head of strategy for Fifth Third Bancorp.

“It became very clear that there’s a pervasive need to address student debt. People lean on family and friends. It’s tough.”

Making it happen with CommonBond

To offer student loan refinancing, Fifth Third turned to CommonBond, an upstart student lender which has helped originate and refinance over $2.5 billion in loans for tens of thousands of people.

One major issue to tackle was the branding on the joint offering. There haven’t been many bank-fintech partnerships in student loan refinancing.

“This is the first time since the financial crisis that a bank and a fintech have teamed up to provide bank customers a better way to pay down student loans,” said David Klein, CommonBond co-founder and CEO.

To start, the firms opted to go with a co-branded experience, playing off both brands’ strengths and expertises versus a white label solution. “What we realized is that leveraging the benefit of both brands is what will likely most get consumers to act, thereby saving customers up to thousands of dollars on their student loans,” Klein said.

The current form of the customer experience works like a referral relationship. Fifth Third handles distribution and CommonBond originates the loans. Fifth Third web users can access information about student lending on the bank’s website. To sign up, they click over to a landing page hosted by CommonBond.

Fifth Third has trained staff in its branches and call center to identify a customer need and explain how student loan refinancing works. The two firms have set up a dedicated phone number to transfer clients over to the CommonBond call center. The firms have also set up an inside help desk to help Fifth Bank staff with tough customer questions.

Buy, partner, or build

Fifth Third’s collaboration with CommonBond goes deeper than this partnership. Fifth Third, like a number of banks, invests in private companies. A few years ago, it decided to deploy this capability towards a fintech strategy it calls ‘buy, partner, or build’. Given how much money flows into fintech, the firm decided it couldn’t survive on its own home-grown technology.

So, investing became a strategic advantage for the bank. Over the past three years, Fifth Third has made 10 investments in financial technology. The approximately $100 million it has invested has gone into a couple of dominant themes: consumer lending and consumer payments. After making an investment, Fifth Third looks for opportunities to introduce its portfolio companies to its customers.

Analyzing the student loan refinancing market, it became clearer to Hoffman that CommonBond was the right partner. He believes the fintech firm has very strong technology capabilities that result in strong customer journeys and origination.

“In fintech, you’ll find companies that are 99 fin and 1 tech and others that are 1 fin and 99 tech,” said Hoffman. “CommonBond has a good blend of fin and tech, which is rare.”

But Hoffman cites CommonBond’s corporate culture as what sets it apart. Molded by Klein’s leadership, the firm remains the only financial company with a dedicated social promise.  As a result, CommonBond has given significant money and leadership time to charity, way ahead of profitability.

Fifth Third invested in an equity round earlier in 2018 and has been working on this partnership in its wake.

An interesting feedback loop

Both firms are learning from the feedback generated by the partnership. Without a lot of exposure to student loan refinancing, customers actually have a lot of learning to do.

“Since we launched the partnership, we’ve seen something pretty amazing happen – a good amount of customers calling our Care Team to open up the conversation about their student loans. They just want to talk,” said Klein.

“Our goal is to help people make smart decisions about higher education finance, and we’re seeing this partnership crack open the conversation about people’s student debt – which ultimately leads to finding a solution.”

Online Lenders

A deeper look into the payroll advance industry

  • Along with 10 other states, New York is looking into the payroll advance industry.
  • Branded as a kinder, gentler version of payday lending, it's possible that the industry's tipping model is more than it seems.
Paige Stern | August 13, 2019
Online Lenders

‘We call it Dream Fuel’: Behind the growth of PayPal’s SMB lending business

  • PayPal is scaling its SMB lending business and its program recently surpassed $10 billion.
  • svp of credit Darrell Esch joins the podcast to talk about where the business is headed.
Zack Miller | August 07, 2019
Online Lenders

Affirm’s Max Levchin: ‘Walmart doesn’t get enough credit for its customer focus’

  • Walmart has recently rolled out Affirm's POS financing broadly in its stores.
  • CEO and founder Max Levchin sat with Tearsheet to talk about the state of the business.
Zack Miller | June 21, 2019
Online Lenders, Podcasts

Mirador’s Trevor Dryer: ‘The world doesn’t need another high price lender’

  • Banks and credit unions are able to compete digitally with non-bank lenders.
  • Mirador helps them compete on speed and customer experience.
Michael Deleon | June 17, 2019
Online Lenders, Podcasts

MSTS’ Brandon Spear on credit as as service: ‘Find a way to solve payments painpoints and you’ll create a real advocate inside a business’

  • MSTS was started by a Fortune 100 to help with fuel payments.
  • Now, the company wants to help large B2B companies solve complex payment issues.
Zack Miller | June 10, 2019
More Articles