We will get started again, keep it moving here. Thanks, everybody, for joining us. Pleased to introduce here, we got Fifth Third here with us. I think this is a really interesting time. We have what feels like an accelerating pace of change in technology, integrating with banking, more than just the back office, moving through to the front office and client experience. Really pleased to welcome here with me Bryan Preston, the CFO of Fifth Third, and Jude Schramm, the Chief Information Officer at Fifth Third. Thanks for coming to Boston. Thanks for being here with us today.
Absolutely. Thanks for having us.
Appreciate it.
Great to be here. Before we get into the technology stuff, we did just finish the major integration of Comerica. Congratulations, by the way. Seems like it went really well.
Thank you.
Maybe just talk about what it means for the franchise broadly in the future. What are the biggest opportunities from here to create value with the combined franchise that maybe didn't exist at either one independently?
Yeah, I think one of the things that's been really good about this transaction is when we look back and think through the investment thesis on why we thought this transaction made sense for Fifth Third and how it could make us a more powerful franchise going forward, all the things across the horizons. We talked about it as a deal for across time horizons, a deal that works today, a deal that works in the near term, and a combination that really is going to be a platform for growth in the future. All of that thesis has played out for us in a way that is looking even more powerful than what we originally thought.
The strength of the Comerica middle market franchise, we can just see where it was being held back by the constraints that the company faced from a liquidity and from an expense capacity perspective. The things that that company needed to be better and to take advantage of the opportunities in the fabulous markets it had access to are all the things that we have been good at executing over the last decade. All the investments that we have been making to get better at analytical deposits, at building de novo branches, at deepening relationships from a middle market banking perspective, the product set that actually allows you to sell on value. All of those things are the things that are going to be necessary for us to be successful as we grow into Texas, and that opportunity looks even bigger than what we thought.
You look at the early deposit campaigns when we were doing marketing under the Comerica brand, the response rates were fantastic, and we are excited about the new campaigns that we are going to be able to do under the Fifth Third brand and the Fifth Third products. Same thing in the middle market banking space. The opportunity there from a growth perspective, Texas is now our, from a middle market banking perspective, is our third-largest market from a middle market banking perspective. Michigan is the largest. It is one of the fastest-growing markets, even in a year of integration for us. I think it is going to be bigger in middle market banking probably within the next 12 months than Michigan. So, it is that quickly going to become one of our fastest markets.
The opportunity is tremendous, both from a balance sheet growth perspective and then deepening from a fee perspective, because the products that we bring are really resonating. Our teams had a. It is a long year integrating a transaction like this, and we cannot say enough great things about what our team has accomplished. The team is really excited about growth from here.
Awesome. Now we are through integration, so obviously everybody wants to know what is next. You talked about the opportunities. How do you frame that in terms of what it means for Fifth Third relative to what you think the industry is? The growth profile, the earnings profile. What does it mean for earnings as we look out over a few years, whether it is through a cycle or not through a cycle? What does this actually ultimately mean for investors?
Yeah. We have engineered a business model that has put us in a position to deliver what we think are going to be top returns through the cycle. 53% efficiency ratio, that actually allows us capacity to continue to invest for growth. 19+% ROTCE based off of the business mix that we have today that does not require things like a concept of credit normalization. That is what this franchise can deliver. Now on top of it, you actually have the markets to invest in and accelerate the pace of organic deployment of capital, which is the best way for us to deliver value for our shareholders over the long run.
So, we just think it puts us in a position to just start compounding book value at a faster and faster pace, because the growth opportunities resident in these markets are far above where Fifth Third was a decade ago. You look at our footprint in the mid-2010s, predominantly Midwest. We had kind of the green shoots of the Southeast investments. So much of our growth capacity and production capacity now are in markets that carry a growth rate above what would be the national GDP. So, when we think about a business that should be growing at nominal GDP plus a point or two, the region advantage, the economic advantages of the regions of where our investments are today just puts us in a position that we think that few other banks are in from a growth potential perspective.
And you've talked about a lot of these growth potentials. You have the new Texas markets, you've got innovation banking, payments, wealth. You've got your legacy markets where you're still really focused on. How do you prioritize investments across all these opportunities? That's because there's a lot going on now.
Yeah, and it's the. Now, prioritization is one of the most important decisions that we make as a leadership team, and really trying to understand where are the opportunities to concentrate in your investments and the things that are going to make the biggest difference for the company from probably a long-term perspective. We talk a lot about having a limited number of priorities that we invest in consistently. That's what's driving the performance you're seeing from the company today. The retail deposit performance that we are fortunate enough to be able to brag about, that's because of a decade of investments that we've layered in over time, and we've learned, and we've improved, and we've optimized. And then once we prove out a methodology, we figure out how to lean into it even further. And so, we have these vintages of growth.
We talk a lot about the coiled spring. We're in the middle of a virtuous cycle where those prior investments are feeding that next round of investments. To make that work, though, you've got to be very disciplined on a handful of things that you're going to do very well. And our prioritization is around, one, we think consumer households and consumer checking is a foundational point from an attachment point perspective, so we want to be great at that. So you're always going to see us invest in those capabilities. And we think the attachment points in middle market banking is another thing that drives significant returns for us. Lending and bankers is always a way that's a great attachment point. But we've added another one with commercial payments.
Having leading products where commercial payments can be an attachment point, for us, we believe is a differentiator as well.
No, that's great. Maybe as a live example, we did have some extra. You outperformed Comerica on the synergy of the expense save opportunity and reinvested some of that back into the frontline, effectively, like opportunities. Maybe that's a good example of where do you think about incremental earnings falling to the bottom line? Where do you think about reinvesting them into the future? What's that trade-off look like? How is that trade-off made here?
Yeah. It's always done at a very granular and analytically grounded approach. We're trying to balance making sure that we're delivering on the commitments that we're making to our shareholders, but also making sure that we invest in the company over the long run. Our industry is an easy industry to harvest. That's one of the things that we've tried to make sure that we continuously do, which is invest in customer acquisition and invest in growing the production capacity of the company. What that means is we're never fully kind of pedal to the metal, full steam ahead. There's always some, whether it's marketing campaigns and incremental deciles that we feel like we can mail into. We're balancing that, delivering near-term results and making sure we're investing for the future.
What is nice today is there are more opportunities for us that we believe are returns accretive, and for us to be able to grow in a compounded way over time, that we're going to be able to lean into on a marginal basis a little more. The other aspect of our model is everything that we do is very modular. These are approaches where it's one branch at a time, it's one marketing campaign at a time. So when we see that the performance is changing, we change our tactics. So we're not committing the franchise to unsustainable cost structures. We have the ability to adjust, and when we reach a point in time where those marginal decisions aren't accretive for shareholders, we're able to adjust and then let that drop to the bottom line or return that capital to our shareholders.
Great. Jude, we are lucky to have you with us here today. Bryan, we are always lucky to have you here. Jude, we see a little bit less of, so maybe we will give you a chance. Look, technology, the role of technology in banking has been changing over the last five, 10 years, and it seems like it continues to accelerate. Just maybe talk about your role at Fifth Third and the role of technology at Fifth Third as you see it.
Sure. Yeah. Thanks for having me here. I do appreciate it, Matt. It has changed a ton, and when you think about the role of technology in a bank, one of the things I try to always reference back to is when Darren King, our Head of Commercial Banking, joined the bank. He and I were talking for the first time, and he asked me, "Are we a bank or are we a software company?" I said, "Let's be clear. From my opinion, we are a bank," which was the right answer, by the way, from Darren's perspective. I think it is important because what I think it does highlight is, technology is becoming increasingly a very important part of the way every one of our customers have and experience their relationship with the bank.
It does not matter if they are in the consumer side, the commercial side, or the wealth side. The way I try to think about it is, IT has really got to be in my I am a historical, more industrial guy. We have to be the supply chain of the bank. The way that we have to set up our infrastructure and the way we have to make sure that we are trying to remove friction, build resiliency, and deliver those experiences to customers so that they have the money where they want it, the way they want it, so they can use it the way they want to use it, is all a function of how we really architect our IT infrastructure to deliver those capabilities and those experiences to them. That is the way I think about it.
Again, it is a supply chain, it is resiliency, it is speed, it is agility for the company. I think it really showed itself in the Comerica conversion because you think about from deal announcement to really conversion was about 11 months. That is a pretty significant pace to do something of that magnitude. Beyond the brilliance of the people that were involved from the leadership of both companies and all the people that made it happen, the modernization of our tech is what I think helped us accelerate through some things that typically would take a very long time that we did and would take years, took months to get done.
Awesome. I don't want to resurface any budget wounds that might have happened in the last budgeting cycle. Maybe this is a good chance to talk about
Actually, conversion's a great budgeting cycle.
Yeah. That's right. Maybe this is a good chance to talk about the technology roadmap and how that balance of where are we investing because we need to invest to keep pace, where do we invest for incremental capabilities, and how does that trade-off work with the budgeting process and the investments that you choose to prioritize? Just kind of walk us through how you think about those priorities.
Yeah, sure. One of the things that we've had in place for quite a while, and I give a lot of credit to Bryan for leading us through this, is we kind of look at our IT budget in three big chunks. There's really what we call Protect the Bank, there's Run the Bank, and there's Advance the Bank. And we try to segment the work that we do across all of our teams into those three buckets, and then we allocate our tech spend in a guided kind of percentage we think is the right investment into those different segments of the budget. But there's an underlying process that works for us really well. It's a continuous process that allows us to bring things in front of the leadership.
We are in meetings every week looking at investment in tech spend to really look at, A, are we optimizing the spend and getting the most efficiency out of it in the way we think about allocating that capital or that expense into the tech spend?
Yeah.
We also want to see the outcomes. We're a very outcome-driven organization, so it isn't really just me and my team wanting to go spend money on new platforms or on new solutions. The business comes together and we bring a business outcome, and that is what we use to lever the prioritization of what we're going to invest the tech in, because that's going to allow us to really anchor what we're investing in toward the future growth and what Bryan was talking about with the franchise, so we can really underpin that and back it where we need to. Then we have the agility because of the frequency to have to pivot that when we have to, if the market changes, if a dynamic changes. Comerica's a great example.
We were able to really ramp down Advance the Bank for a little period of time so we could focus on Merge the Bank
Right
and that's what became a big pivot for us, while not sacrificing Protect and Run.
Awesome. I can't have you on stage and not ask about AI.
Yeah.
Maybe just talk about where you're seeing the biggest opportunities for AI at Fifth Third, how it's being deployed, and how you're thinking about the opportunity there.
Sure. We're taking a pretty inside-out approach to AI. Two years ago, we deployed, like probably most of you have, Microsoft Copilot to all of our knowledge workers. We have about 13,000, 14,000 employees using that every day. The goal there was really to get them two things, I think. One is, it's a culture thing. We're getting the company used to these tools and experiencing how they're going to interact with these things as we expand more of the business and use cases that we do over time. We've been investing in that now for a couple years. In my world, 100% of our engineering workforce is required to use AI, so we actually track that, we measure it. That is where we're starting to see probably the earliest returns and outcomes.
We're seeing about 40% of our code being produced by AI in a given, we call planning increments, about 12-week sprints for our teams. About 90% of the testing is being done with AI. What we're seeing is roughly a 20%-30% productivity gain. The way we measure that in that world is velocity. It's how much more can we get done while increasing the quality of what we're putting out as well. That's our measurement for how we're able to take AI and use it to really get our engineers to be able to meet more demand from what we want to do for driving better experiences for our customers.
Then if you kind of expand through that, the other place we are really investing and have been investing even through the conversion is looking at how we are going to bring it to our customer experience. Our chatbot on our consumer app called Jeanie® today is more traditional AI, but starting this quarter and into the first half of next year, we are going to be transitioning that to an agentic capability where Jeanie® will be able to be completely agentified and be working with consumers. We will just keep growing that experience. It will come out of the chatbot at some point. It will be more of the interaction in a normal way over time, and that is the way we see that growing. The pacing in that is going to be our comfort with that, our customers' willingness and desire to want to have those different interactions.
So we are going to be able to pace that how we want, but that is, I think, the frontier and where AI is going to be going over the next couple years for us.
Great. When we think about the economic opportunity here for Fifth Third, what is the big prize and how does it evolve? Is it lower cost? Is it better customer experience? What are we playing for here economically?
Yeah. I do think it is going to be disruptive enough that it is going to manifest itself into all of those ways. You are going to see, I think today our early focus is scale, and it is increasing capacity. We want our employees to be more effective, meaning can we give them these tools to be more efficient in what they do and more productive? Can they get more done with the same amount of people? Can we continue to grow the franchise at a clip that we want to? You look at some of the back and middle office and try to hold some of that as relatively flat as we can, but we can invest more in the sales and in the people where we need to grow the top side of the business.
That is going to be an important part of that for us, and I think that is a big focus for us early on. But over time, you are going to be able to see, is there going to be efficiency in harvesting AI to do more work where we maybe do some parts of the bank with fewer people?
Yeah.
There is going to be new jobs, going to be new things that we are going to find to do. Then finally, I think if you can use this to increase the velocity on the front end, our product capabilities are going to help us drive top-line growth at some time. It is going to give us a chance to grow because we can get things to market quicker, and we can be more innovative in what we are doing and find new ways to drive customer stickiness and grow deep in relationships as well as find new.
That is great. In five years, if you were to look at the industry, do you think AI is kind of table stakes, everybody is plus or minus?
Yeah.
Are there ways to drive kind of more durable competitive advantages or any longer-term competitive opportunities?
Yeah. I think five years from now, it's going to be table stakes. I think your point about competitive advantage to me, I think is going to be, you've got to be right now being ready to be a little bit closer to the first mover side.
Yeah.
Because I do think there's a point where if you can get out in front and you can use this to establish some competitive either ability to grow or to retain customers as we go through this transition, you're going to get some escape velocity. It's going to be really hard to catch up, and that's what we like to continue to think about as we invest in where we're putting AI in the customer hands and the experiences.
Yeah, and I think AI as a productivity play from an efficiency perspective is 100% going to be table stakes. It's going to be a path of how institutions lead. When you think about an industry where our raw materials are capital and liquidity, the ability to operate a lower-cost model allows you to deploy the same capital and earn a better return for the same risk. That is a differentiator. That is going to be table stakes with AI.
I think what changes is that AI gives us an ability to change the value prop with our customers in terms of the types of services that we can provide and the types of problems that we can solve for our customers in a completely unique way, whether that is the advice that we provide or the ways and paths we give them to interact with us. That, to us, we think is going to be the bigger differentiators. People that really understand how to unlock that incremental value that they can provide to their customers is going to be a huge differentiator going forward for growth.
How inside of a bank do you balance the desire to do all of this quickly with all the data, the governance, the important things we have in terms of just being a bank? How do you balance that at Fifth Third?
Yeah, I think from a technology perspective, a couple things. One is, because of the investment we've made in modernizing the underlying bank platforms that we have and having our environments both on-prem and modern data centers as well as in the cloud with our partners, we have the infrastructure in place to scale AI very quickly. I think the gating factors for us aren't going to be investment in more infrastructure. It's going to be, to kind of your point, how can we make sure we have the controls? How can we make sure that we have the governance in place to get comfortable with the different experiences where we're going to expose AI either internally or to our customers? Those will be more of the pacing factor than the technology itself.
The one interesting thing about AI is, as you all, I'm sure, are experiencing yourselves, either in your personal lives or at work, it is not hard to enable and then turn it on, right? It's the one technology evolution that isn't going to require this massive build-out from an IT shop inside of a company, because if you're already modern, if you're already in the cloud, if you're already there, now it's about basically turning it on and then controlling it.
Yeah.
When you moved to cloud, when you went to mobile, when you went to these things, you had these massive infrastructure build-out that took years. You do not have that. That is why I could enable 13,000 employees with AI in 60 days. I think the gating factor is going to be the controls that have to be in place, because that is the one thing that it is outpacing-
Yep
globally, is the real understanding of its potential impact if things go wrong. That is why you hear a lot about that. We are going to make sure that those things are in place. We are never going to let the desire for speed get ahead of the desire for having a good way to control the pace and enable outcomes that we believe are the right ones to be going after.
Great. Maybe just one more before I turn it open to questions for a minute. One of the technological challenges, it feels like cyber threats just keep getting faster, more sophisticated. What are you doing to evolve your defenses and stay resilient as you are trying to grow the bank through all this?
Yeah. Mid-year this past year, Fifth Third was given the opportunity to participate in Project Glasswing, which was a project kind of co-sponsored by Anthropic and by the U.S. government, to really do research on cybersecurity to try to get ahead of the wave of what is really, I think, here now, as you guys have all probably seen in the last couple weeks. In that, we invested heavily into building cyber defenses for being able to scan code so we can find vulnerabilities and we can patch them ahead of the things that are coming. For example, there was two big events a couple weeks ago, that they were worried about the whole internet because 70% of the code was vulnerable. We did not have that issue. We were modernized past that one. The other one, we were able to patch that in like an hour.
What we built then was a muscle, both technically and operationally, to be able to get ourselves in a position where we can patch code very quickly. It is fairly automated at this point for us. But when things happen like a zero-day, we went from a cycle that was a 30-day cycle, we are now getting that done in a day. A lot of that has given us a chance to be on our front foot. The second thing we did as a part of that is we built a really good harness for scanning large code repositories that has given us a chance to use that now repeatedly, as we want to look and continuously scan code. Then to, I think, help our industry, that we have all got to be, this is a place where we are going to have to work together.
We ended up packaging that up and made it available for other banks to download. We have had over 100 downloads of the harness to try to help get that out there for others. That is the kind of where we are evolving from. The last thing I would say is, you got to have your defenses ready. So we have been building agent capabilities to do observability in our own environment, detectability, so that, God forbid, should something ever happen, we can find it quickly and contain it. The last thing I will say, and this is a big piece of it and why I think we are able to move fairly quickly, is we are not wasting time upgrading our legacy software. We have, for a number of years, invested, as I mentioned, in our Run the Bank and Protect the Bank investments to stay modern.
We do not have end of life in our technology stack. A lot of our peers right now, I think, are spending time getting caught up on that, because I think some folks have fallen behind in that. That is going to be step one, because if you are not on either current or within one version, you are going to take longer to get those vendor patches, because they are going to patch from newest to oldest. We want to make sure that we are in the front of those lines when we have to do that. Those are the places that we are heavily invested in.
And your lack of customization helps us accept those patches even faster.
Correct. We don't customize, so that helps tremendously.
Excellent. Why don't I turn it over and see if there are questions in the audience? I see some right here. We'll go with Mike to start right there.
One easy and one hard, I guess.
Oh.
So-
Do I get the easy one and he gets the hard one?
You get the easy one. Jude, describe LUCY.
Yep.
As you mentioned, scaling AI is easy. Scaling controls and harnesses and governance is hard.
That is right.
What you have done with LUCY, I know we talked in the hall. I did not
Yep
completely understand the extent of what you're doing with LUCY.
Yeah.
I'll save my hard one for Bryan.
Okay. Yeah, thank you. As Mike mentioned, LUCY is the name that we gave to the harness that I mentioned. What that really is if you're not familiar with a harness, it's the way you interact with these large language models, like from Anthropic and from OpenAI. That is where you really build your guardrails or your rules for how that harness is going to work. We built this harness to really target large repositories of code. LUCY is something that we have that can scan all of our internet-facing code, and it can do it in about a day, which is a pretty quick time to scan that much code. Then what it does is it does three things. It finds vulnerabilities that are exposed in software that we have.
Two, and this is really important, it will find vulnerabilities that can be chained together. If you think about the old world, if you had a vulnerability, you had one thing, you patched it, and you had kind of ranked those all as high, medium, low. The low ones we didn't worry about a lot. Now, these models can chain lows together across your environment and create a high. It's a whole new way to think about it. LUCY finds those as well. It's also, I call it she, I think I did. Sorry, these AIs are getting pretty personal. At the end of the day, then it is also putting to our engineers the patching so that it's producing the patch to go fix those. They can accept those in our software pipeline, and then we can patch and continue to move on.
Lucy's become really something that we're going to run probably quarterly. Then we've got smaller versions of it that we're running continuously for all of our engineers as they're building code. It's finding vulnerabilities up in the build cycles so that we can close them before they ever even get into production.
Bryan, the hard question. Who are you going to buy, when, and at what price? I think there's a consensus. It's not a consensus. I mean, you're the exception that proves the rule. The stock price has outperformed the BKX by a decent margin since the merger announcement, and that's the exception to the rule for a while there. At this conference, we've had presenters going back in the 1990s, the preferred consolidators, like Bank One, it worked till it didn't. Citigroup, believe it or not, it worked till it didn't. JP Morgan was the preferred buyer. Then U.S. Bancorp going back in time was the preferred buyer till they weren't. PNC still today, you could argue, is still the preferred buyer. So you and PNC are the preferred buyers out there. You have this better technology infrastructure.
How do you think about deals going forward in terms of timing and targets, and what's the next Comerica that seems like stock market lightning? Thank you.
Yeah, I think what all of that really means when you think about the terms preferred buyer is that investors trust us to make good decisions. They trust us with their capital. They trust us to not destroy shareholder value. We take that seriously. I think we've been pretty consistent for a couple years now, and it's the same thing we said prior to Comerica. For us, M&A is not a strategy. M&A is an accelerant of a strategy. The things that we would consider, because you can't sit up in these positions and say you would never consider anything, because that's not in the best interest for your shareholders either. But it's got to make financial sense for our shareholders, and it has to accelerate the strategic objectives of the company. We're not going to be a company that's going to do deals to do deals.
When we say what makes financial sense, it is in a world where we believe being able to generate and grow book value on a consistent basis over time, not diluting our shareholders, and that requires a very long earn back, that is a core principle for us. It has to be worth it to us from a financial perspective in terms of whether it's earnings potential or growth potential over time, for us to distract the company. Whether it's a big deal or a small deal, our tech and product teams basically had to take the last year off from doing the things to actually Advance the Bank from a core capability perspective, because they had to focus on converting Comerica. They had to map existing product capabilities and figure out where we had gaps.
They had to do all of the data build work, because Comerica's data ecosystem was meaningfully different than ours, and having to get their data in the shape necessary for their customers to be able to operate on our systems. There's a ton of work that was done in that. We just are big believers that over the next five years, it is going to be way more important for us to continue to advance the technology and product capabilities of the company, because that's how we When you think about, like Muse might be a next question, and Tim touched on that on the earnings call, we want to have a value exchange with our customer that's based on something that is so much more than just price.
For us to keep advancing that capability and deliver more value for our customers, we have to be able to invest in ourselves. I just don't think the acquisition of a small institution or one where you have to stretch on, that we're getting the right premium versus what we're able to do with investing in ourselves. We're confident in our ability to do these modular investments, earn high returns on capital for our shareholders, and to continue to deliver innovation over time. We think that's going to make a huge difference, and there's a real bar that that creates for us when we consider a deal. Comerica was a very, I think, unique and strong culture that had just incredible alignment with Fifth Third. The institutions have fit together better than I think we even imagined they could on the way in.
I just think it was, for us, it was a unicorn. It was a very special franchise that fit well and gave us a great opportunity. I just don't think there are a ton of those out there, and we're going to be very disciplined as we move forward and we think about transactions from here.
Okay. Other questions?
Yeah.
Right here.
Thanks. Hey, Jude, a couple questions for you. We don't always get to hear from the tech people that
Sure
come here. First, just there's been this sort of years-long debate about sort of dollars versus percentage of tech spend, right? Everybody is on a level playing field if you think about tech spend relative to revenues, but then the universals, the absolute dollars are just enormous. There's this sense that it's difficult for anyone to compete. I guess I'd be curious to hear your thoughts. I thought you made a pretty compelling argument as it relates to AI. You just don't have the same dollar lift per se, number one. Then second question is, just this notion of agents, and stuff like Muse. Where do you stand in sort of that conversation on-
Yeah
allowing and identifying agents to come into the bank, sort of the liability questions, et cetera?
Yeah. That's a good question. Relative to tech spend at the bank, I think if you look over the last five, six, seven years, our tech budget's grown about 6% as a CAGR year over year. To your point, I don't think about anchoring it to, like as a percentage of revenue. That's not a way we think about it. What we're trying to do, I think it's similar to, I think, the way we think about just investing in the bank in a continuous growth, is making sure we understand the distribution of, like I talked earlier, of the tech spend is where we want it to be.
When we started three or four years ago, kind of segmenting my budget into, or the bank's budget, I should say, it's not mine, but from Protect and Run and Advance, we have targets that we want to hit in terms of the allocation across those. Over the last three years, we've really tried to move it so that by really prior to Comerica, now coming out of it, we want that Advance part of my budget to run somewhere between 45% and 50% of the overall spend. We want to keep cyber around 15%. Honestly, it'll probably be a little higher this next year as we're investing in some of the acceleration of our cyber capabilities. Run is that continuous stay modern and don't let things fall behind. It makes up the difference in that.
The big thing for me is, one of the benefits I think you have in a guy like Bryan in the CFO chair and Tim in the CEO chair is, we do this continuously. This isn't an episodic process for us to think about tech investment. We are already looking and planning it next year, and we have, I think, ideas probably within 10%-15% of what we know it's going to be. What we're really working on now is what are the priorities of where we're going to take that investment and allocate it into those three buckets, and what outcomes do we think we're going to get out of it? That's the way we're going to continue to drive it. I think it's a good way to think about it.
Also, in this industry, I mean, it's one of the things I love about it, we're going to set a plan now, and probably by March it'll be half sideways because something will happen in the economy. We have to be fairly agile in the way that we think about what we're committed to. A lot of our ability inside the company is to have agility in what we are investing in. We're going to have modernization work that's just going to have to get done. But a lot of the product work we're doing can modify and pivot throughout the year, so that as we find more opportunities, we can reallocate money as we need to throughout the year. That's the way we think about it, if that directly answered your question. That's the way we think about it.
In terms of agents and Muse, today we block Muse and other types of agents from coming in. We don't want the direct door in for really three reasons. One, we need to sort out as an industry, honestly, liability first. When and if things go wrong, we've got to understand what the banks are responsible for, what the consumer's responsible for. I'd love to say what Meta's responsible for, but I don't find that getting a lot of traction. But that is stuff that needs to be sorted out for each. That's one. The second thing is I do think we need some sort of control capability, you call it know your agent, like know your customer or whatever.
But I really have to be able to articulate back to, I think, our consumer that if you're going to allow an agent to come in, you're going to have to acknowledge and certify something with me, and then I'm going to have to be able to track that as yours so I know it's yours coming in and out. I also have to have the cyber capability to know that somebody didn't get your credentials and hijack your Muse agent and send it in on your behalf, and I don't know it. There's controls that have to be in place before we're going to get comfortable, I think, with agents coming in and being able to transact inside of the core. Then there's some other ways around that.
Like even now today, ChatGPT has a partnership with Plaid, and they will screen scrape just like any other aggregator. We will allow that capability now. I think there'll be a point where you might allow read access to an agent and not write, so that they can't move money, but they may be able to see things. Because we do want to be able, at some point, with the industry, be able to enable more of these capabilities. I think we all have got to just make sure that we feel really confident that we can really put the footprint, the digital footprint on an agent like we can on you as a customer, where we know the device you log in from, we know that it's you, and we've got those authentication factors that can help us feel confident in those transactions.
Put them on here.
Manan Gosalia, Morgan Stanley. Jude, I guess the best way to protect against the risk that you mentioned from third-party agents is to have banks provide their own agentic AI tools to customers.
Yeah.
Can you talk about, I guess, what could be table stakes from what banks might provide to both-
Sure
retail and commercial clients, maybe two or three years down the line?
Yeah.
How do you think about that helping the stickiness of the customers from a first-mover advantage point of view?
Yeah. I think there's two things. From the consumer side, I mentioned earlier that we're working on putting the agentic structure behind our chatbot Jeanie® by mid-year. The real goal of that, I think, is over time to have our agent be able to operate on your behalf so you don't have to send a Muse agent in, right? Jeanie® is already embedded into your consumer life as a customer, if you think about our mobile app. We've already basically built the skills to have it replicate every capability that you can do in our app. So, where we really see this going is that interaction's going to really evolve, because instead of having to navigate 200 features in our mobile app, you're going to be able to type or talk to Jeanie® and have it just do things for you.
Have it pay your, we always say, pay your lawn company, pay, send somebody Zelle that you need to send money to, and have it do those types of things. Maybe even move money within your accounts, right? So that you can stay as profitable as a consumer as you possibly can be with the money you have with us. We want to see those things evolve as we enable that. That can go beyond working internally. I can see a day where your bank agent, because you should trust it more than your Meta agent- can buy things on your behalf on Amazon or out on whatever you choose to go buy things externally. It can become that trusted agent for you.
That's where I think this could evolve, and that would create a lot of stickiness that we think is the experience we want our customers to have with us. The last thing it does is it can actually add extra personalization, because if I can get that agent to do those things for you're still going to need to your bank at some point, and you're going to want to talk to somebody. It could be for a mortgage, it could be for something you're doing with your investments and equities. I think humans are still going to want to know that they can stare somebody in the face.
Our goal is to have Jeanie®, when she can't do those things, get you to the person closest to you at the branch closest to you, so you don't normally have to talk to them, you can just go see them. That's the stickiness that I think we're striving for and achieving on the consumer side, long term, that I think is going to create an advantage for banks that can do that. Just to go quickly on the commercial side, I think a better example, and I'll go something in a little different direction. We're already enabling MCP, which is basically a server that can interact with agents on our Newline platform.
I think the stickiness in our payments business, when you're integrated technically in with companies and their ERP systems for them to do receivables and payables and the way they manage your treasury management with us, there's going to be a way to enable agent-to-agent interaction there that's going to be, I think, very beneficial for both the banks and companies in the future.
You get away from your traditional maybe interface that you might use as a CFO or a treasurer, and now you're probably interacting with your agent that's working on top of Oracle, SAP, and your ERP system, and it can interact with Fifth Third and our agent through our Newline platform to start to help, or from a fintech or if we extend that way, to help those agents work together to help optimize your treasury management services you have with us from a managed service perspective, from a product perspective. That's what we're already building towards in that space, because we think that's going to be a real early opportunity for us to really understand how agentic AI capabilities can work inside of our commercial bank space.
Are you charging a fee for some of these higher value services?
I am sure, yeah.
Maybe. It is an extension of how we think about managed services today, right? What we are doing is we are actually putting ourselves in a position to solve operational problems. So the trade-off when they think about signing up for these, it is hard costs on their side. It is not traditional treasury management where you are just going in and trying to discount the bill. You are actually helping them solve an issue where they are going to be able to run more efficiently, either from a payroll perspective or even third-party optimization perspective. And when we talk about what are those different attachment points, that has been the strategy around commercial payments, and we view that as the next natural extension of what that business should be.
Bryan, Jude, thank you so much for joining us at BAAB. Really appreciate it.
Thank you.