Brendan Coughlin is president of Consumer Deposits and Lending at Citizens Bank with responsibility for consumer deposits, payments and lending businesses. Product lines include checking, savings, debit and credit cards, auto finance, home equity, student and personal unsecured lending.
Citizens’ personal lending business includes an innovative merchant financing platform that Coughlin’s team created and launched, including partnerships with Apple running their iPhone Upgrade Program, and Vivint Home Security. He is a member of the bank’s Executive Committee.
PBN: You oversee consumer deposits and lending for Citizens Bank. In consumer lending this includes areas such as automobile finance, home equity, students and personal unsecured lending. That seems like a pretty broad portfolio. What are the commonalities for those types of lending?
COUGHLIN: Consumers don’t want a banking experience siloed by products and services, but one that is simple, frictionless and integrated. Increasingly, customers are choosing to engage with us digitally, and have higher expectations around what “easy” and “digital” means based on their experiences with the likes of Amazon and Uber.
The banking experience we provide should be simple to use and consistent, so we’ve spent time and money investing in technology and processes, making it easier for customers to do business with us across all of our products.
Lastly, customers tend to not think of their needs at a product level first, instead coming in during a life event, such as paying for college or managing their overall debt more effectively. Very often, multiple products can meet the same need, so we advise our customers of all their options, empowering them to make better decisions for their family.
PBN: What is the iPhone Upgrade Program and how did it come about?
COUGHLIN: We have invested heavily to innovate our payment and purchase model for larger retail purchases, [such as] high-end electronics. With customers adopting virtual wallets and improved point-of-sale technology, the lines of how consumers pay for purchases and when to finance them are beginning to blur.
Consumers typically don’t want another credit card in their wallet, so retailers’ efforts to push particular store cards via discount is no longer effective. Retailers are also unwilling to add “friction” and delays into their purchase experience, which has been typical in the past for bank financing. So, a few years back we set out to build the world’s simplest retail-financing experience, enabling merchants to reconsider how they offer their products.
With Apple, both the concept and the customer experience is extraordinarily simple. Instead of paying for a new phone upfront, the customer can pay for that phone over time at a zero percent interest rate. They also are eligible to upgrade to a new phone every 12 months when Apple releases their latest cutting-edge technology. The customer simply drops off their old device, picks up a new one and continues to pay a low monthly payment for the new phone.
The application and approval process is literally instantaneous within seconds, and their ongoing monthly payment automatically goes on their credit card. The customer never pays any interest, ever. We believe this is the best retail financing experience available in the U.S. and we are thrilled to partner with a company [such as] Apple, who, like Citizens, sets such a higher bar around their customer-experience expectations.
PBN: Do you see other such opportunities in consumer lending, say for products such as TVs or other digital products?
COUGHLIN: Yes, absolutely. Customers are increasingly familiar as use of person-to-person payment platforms [such as] Zelle and changing demographics have left many consumers (particularly millennials) less likely to use store-branded credit cards as financing options. Following our successful partnership with Apple, we are also partnering with Vivint Home Partners to make having the most-advanced home security technology more affordable.
We are finding that this simple experience and very strong customer proposition with zero percent interest is resonating with many retailers across a wide variety of industry verticals alike. We expect this market to continue to grow and mature, and we will continue to drive further innovation/focus by supporting our merchant partners while encouraging our commercial banking clients to think differently about how to serve customers and sell their products.
PBN: Has all the discussion about the high cost of a college education had an effect on how much lending you do to students?
COUGHLIN: The short answer is “no.” In fact, we are doubling down on better serving our customers in this space, which we believe is underserved by banks. The cost of higher education has outpaced inflation for decades, putting real pressure on the affordability of higher education for many Americans. While we cannot control tuition rates that universities charge, we can control offering more-affordable financing alternatives to customers who need to borrow to pay for school. We’re also empowering young people to understand how to make smart financial decisions around school selection, and whether they need to take on debt to attend.
And once a student has graduated, we’ve pioneered a new market as the first bank to refinance student loans, accelerating many customers’ ability to become debt-free and move on with their lives by lowering their interest rate and payment significantly. This effort confirms that our products are resonating well within the market.
Over the years, we’ve continued to see strong loan growth and added to this portfolio, most recently launching a student loan refinancing product for parents earlier this year. The bottom line is that getting a college degree is still very much a part of the American dream, so parents and students should have the hard conversations with their children as early as possible and only take out debt when they’ve thought it all the way through.
PBN: Has Citizens becoming a freestanding publicly traded bank had an effect on the types of consumer lending that the bank does? What is different and what is the same?
COUGHLIN: Becoming a freestanding publicly traded bank has allowed us to make significant investments in our lending business. Generally, after the financial crisis while still owned by RBS, Citizens had to draw the loan book back considerably. Some of that was prudent, and some negatively impacted our ability to compete effectively. Since our IPO, we have outpaced our peer banks’ consumer loan growth by between two to three times, taking significant market share. And, more importantly, the quality of the loans is rapidly improving. We’ve done this by both better competing in the traditional bank loan products, as well as creating very attractive niches for ourselves that our competitors are not in.
We’ve made major investments in the mortgage and home equity lending market and have No. 1 market share in home equity across our entire footprint. We have grown our auto portfolio significantly, moving to a full prime lender to serve our customers more effectively, despite now intentionally moderating the size of that business. We’ve created outsized growth by building differentiated capabilities in our student loan business, launched an innovative personal loan business and introduced a merchant finance business that almost none of our peer banks have.