App helps users attack student debt
Fifth Third’s Momentum mobile app lets users round up purchases to the nearest dollar and applies excess to student loan principal.
As the largest living generation, millennials are dominating the conversation at Fifth Third Bank these days.
U.S. Census data released in 2016 revealed that millennials, often defined as those born between 1981 and 2000, surpassed baby boomers (74.9 million individuals) at 75.4 million individuals last year.
Fifth Third Bank CEO Greg Carmichael, visiting the West Michigan market Nov. 1, spoke with the Business Journal about the bank’s efforts to gain market share among millennials.
Amid seven Michigan branch closures in 2017 and a redistribution of the bank’s footprint nationwide, Fifth Third has seen double-digit year-over-year increases in digital banking the past several years — including use of its mobile app (65.6 percent of West Michigan customers), web-based transactions (65 percent of all bank customers) and virtual check cashing (about 65 percent of all bank customers).
He said the bank decided to take one further step, introducing a free mobile app called Momentum in September to address a persistent millennial problem.
“The average student who graduated college in 2016 had $37,000 of student debt,” Carmichael said. “We surveyed and talked to around 1,000 millennials, and this was bar none the biggest challenge facing millennials. We launched the product to help with that.”
Carmichael said the app is a “low-impact, subtle way” to pay down student debt faster for Fifth Third Bank debit card holders.
“Let’s say you swipe your debit card, and your transaction is $3.60, and you round up to $4. You don’t miss that 40 cents,” he said. “It’s not material enough to alter what you can and cannot do versus at the end of the month, saying, ‘Can I afford extra?’ It’s more consistent and more impactful.”
Users can choose to round up or pay an extra $1 with each purchase. Fifth Third Momentum can be used with more than 30 major public and private student-loan servicers.
He likened it to the statistics of people not paying extra on their mortgage principal.
“The natural thing to do is pay what’s on the statement,” he said, noting people could pay extra, “but that’s not human nature.”
Tom Welch, West Michigan regional president, said the app can be used not just by millennials but also by their friends and family who want to help.
“There is $1.3 trillion in student debt out there. We came up with this product to help reduce that number. It’s close-knit crowdfunding,” he said, referring to a popular technique where strangers and friends can contribute to fundraising campaigns through online payment systems.
Carmichael said that feature capitalizes on the fact parents (and grandparents) often want to help their children pay down debt but don’t have the cash reserves.
“We have one new user who, the first thing she did after downloading the app was to get five applications for her family to get them debit cards,” Carmichael said.
Fifth Third Bank did not disclose the number of Momentum users in the app’s first few weeks post-rollout, but the bank did say users have made about $63,000 in payments through the system.
Welch said the app fits into the bank’s strategic plan.
“The biggest priority we have is continued focus on the customer,” he said. “(It’s a) focus on customers, improving lives and building a stronger community.”