Transcript
Hey everybody. Welcome to another episode of What’s Going On in Banking. I’m one of your hosts, Ron Shevlin, chief research officer at Cornerstone, and I’m joined, of course, by my colleague Stacey Bryant, who was horseback riding in Montana this week.
I’m going to try to be politically correct and not ask whether your butt is sore, but tell us what you were doing out there.
How are you doing, Ron?
I’m happy to report that I try to remain fit for these kinds of experiences, so we are strong and solid over here.
I went to Bozeman, Montana, with our colleague Jen Wagner. I’m very much a “when in Rome” kind of person, so of course we went horseback riding through the mountains.
My horse, Spade, kept stopping to eat, so I had to encourage him along a few times. Outside of that, the experience was absolutely beautiful.
We were there for the State Banking Associations annual forum, with representatives from Utah, Montana, Florida, Massachusetts, New Jersey, Oregon, and several other states.
It was a great event centered on camaraderie and creating real memories, which feels especially important in an age when we spend so much time talking about robots and AI.
More importantly, it gave us a chance to understand what is keeping bankers up at night and how much the industry needs to work together to stay relevant.
We’ll touch on a lot of that today.
How are you doing? I know you just came back from Spain.
Yeah, that was a tough gig, except it wasn’t a gig at all. It was finally a personal trip.
For years, at the beginning of every year, my wife would say, “I have a great idea. Do you want to hear it?”
I’ve been married long enough to know the correct answer is, “Yes, I definitely want to hear your great idea, honey.”
Her idea was always: what if we take a trip this year that isn’t tied to one of your speaking engagements?
This was a big birthday year for both of us, so we each got to pick a trip. Her choice was Spain.
We went to Madrid and took day trips to Toledo and Segovia. It was awesome. Spain is such a cool country, and the pace of life felt much more relaxed than what we’re used to in the U.S. People actually get out in the evenings and spend time together.
So that was great.
And I got back just in time for some big banking news that we should probably tackle.
The big story this week was Fifth Third announcing its acquisition of Comerica. Stacey, I know you have some thoughts on this one.
As the Spaniards say, vale.
I’m glad you were able to enjoy Spain without being distracted by fintech and financial-services news.
But yes, you called it. When we think about merger mania and all the strategic partnerships happening this year, this is a big one.
Our colleague and Cornerstone partner Al Dominick recently wrote a GonzoBanker article about Fifth Third’s move.
Fifth Third is roughly a $200 billion institution, and it is acquiring Comerica, a roughly $110 billion bank based in Dallas.
This is one of the largest regional-bank M&A announcements of 2025.
Al’s point was that bigger is not necessarily better by itself. The question is whether the transaction helps the organization become smarter and more competitive.
Fifth Third chairman and CEO Tim Spence has emphasized that the strategy is not simply about getting bigger. It is about getting better.
The way I look at it, this is strategic jiu-jitsu.
Comerica brings a strong middle-market commercial franchise. Fifth Third brings sticky retail deposits. Comerica adds strength in markets such as Texas. Fifth Third brings a broad payments platform.
Put those pieces together and the transaction starts to look less like a simple merger and more like a financial fusion reactor.
This is not just “pull out your calculator and add the assets” banking news. The industry script is changing.
Surprise, surprise, I have an opinion.
First, I think there is a significant industry-structure issue here.
Banking has been bifurcated for a while. You have a handful of very large institutions on one end and a huge number of much smaller institutions on the other.
A bank like Fifth Third or Comerica sits somewhere in the middle, and the middle is often a difficult strategic position.
So part of this really is about getting bigger, not only more efficient.
The combined institution can compete more effectively in commercial banking, especially for larger companies that need a financial institution with greater balance-sheet capacity, broader capabilities, and potentially more international reach.
There is also a technology dimension.
A lot of institutions are facing a choice: do we invest heavily to replace aging technology and modernize our stack ourselves, or can a merger accelerate that transformation by combining with an institution that already has capabilities we need?
That question becomes even harder for smaller institutions.
I recently had lunch with the CEO of a local community bank with about $1 billion in assets. He said, “If I think I need to get closer to $10 billion to reach the scale we need, what am I supposed to do? Make five acquisitions of $1 billion or $2 billion banks?”
That could take 10 or 15 years, not to mention the pain of integrating four or five institutions along the way.
So this is not simply about size. It is also about capabilities and how quickly you can build them.
We’re seeing the same thing in the credit-union space.
The merger between First Tech and Digital Federal Credit Union was approved after people initially asked why two already-large credit unions needed to combine.
When Steve Williams and I spoke with the CEOs, Greg Mitchell made an important point.
Part of the rationale was technology. They looked at what it would take to modernize their technology stack independently and concluded that a merger could get them there faster.
He also pointed out that many of their members work for companies such as Microsoft, Google, and Amazon, companies that increasingly compete with financial institutions in different parts of the customer relationship.
That means the combined credit union needs significant resources not only for infrastructure, but also for digital-product development.
The merger gives them more resources to make those investments.
That makes me think about Fifth Third and Comerica. A combined institution will have a lot more capacity for digital development.
And Fifth Third is already doing interesting product work.
In Al’s article, he included a graphic from Fifth Third’s investor materials about its Momentum Banking product.
The product is still fundamentally a non-interest-bearing checking account, but it includes services such as estate planning, privacy and security features, early pay, and advances.
In other words, they are rethinking the checking account and making it more valuable, rather than treating it as a commodity.
That kind of development takes money.
For banks and credit unions that want to create new products and modernize their technology, M&A can free up resources and accelerate capability-building.
That’s why I don’t think the merger wave is going to slow down anytime soon.
I was impressed by the Momentum Banking example too.
We’ve talked in previous episodes about Chime, SoFi, and other fintechs taking pages from the community-banking playbook while adding digital convenience.
It is good to see a regional bank turning around and borrowing some ideas from fintech product design.
I also recently spoke with our colleague Mary Beth Sullivan, who leads Cornerstone’s M&A practice. She has been seeing more banking CEOs aggressively looking for partners whose strategic priorities align with their own.
Technology modernization is a big part of that, along with the economics of scale and the need to remain relevant with younger consumers.
It goes back to one of our favorite lines: the riches are in the niches.
Fifth Third is adding markets where Comerica already has strong positioning, including Texas, while pursuing its own priorities around stability, profitability, and organic growth.
The important point is that those are clear strategic objectives. The acquisition is a way to reach them.
Ready to move on?
Let’s do it.
Stablecoins.
I don’t know what you’ve been hearing, Stacey, but in a lot of board meetings I’ve been asked to participate in lately, AI is still near the top of the agenda, but stablecoins are now showing up right beside it.
That is clearly a result of the GENIUS Act.
A lot of smaller and midsize institutions are asking where stablecoins fit in their strategy.
One thing that caught my attention this week was an article in Payments.com about U.S. Bancorp saying that stablecoins, along with embedded payments, could become a growth driver.
The CEO pointed to two main opportunities.
One is custody, holding digital assets and related instruments for consumers and businesses.
The other is payments.
What caught my attention was his comment that client demand is still relatively muted. The company is having conversations and wants to be ready if the market takes off.
My reaction is that midsize banks and credit unions, especially banks, need to start thinking more clearly about their payments strategy now.
There are several reasons stablecoins belong on the strategic agenda.
The U.S. Treasury has estimated that a meaningful amount of demand deposits could eventually be at risk from stablecoins. I think some of the most dramatic estimates are overstated, but the threat is real enough to take seriously.
There is also the potential for fee compression if transaction activity moves away from existing rails.
And there may be significant commercial and treasury-management demand over time.
What I think is missing for many institutions is a broader view of the use cases.
When bankers hear “stablecoins,” they often hear cross-border remittances or international payments and say, “We don’t do much of that, so this isn’t relevant to us.”
But there are other opportunities.
Domestic person-to-person payments are one example. Faster-payment rails can already move money quickly, so stablecoins are not uniquely valuable because of settlement speed.
The more interesting distinction is programmability.
Think of a stablecoin as programmable money. Smart-contract functionality can automate conditions and workflows in ways that go beyond simply moving the money faster.
That can create new efficiencies.
I also think there are opportunities around merchant loyalty.
People are afraid that Amazon, Walmart, or Target will issue stablecoins and suddenly drain deposits out of banks.
I don’t think that is what happens.
It is more likely to resemble Starbucks. Customers may keep some money inside a merchant ecosystem because it creates convenience or rewards, but they are not moving their entire financial lives there.
For a smaller business, launching an independent stablecoin would be unrealistic.
But banks could potentially help merchants create stablecoin-based loyalty or stored-value experiences.
That could become a new service for the community and midsize institutions that serve those businesses.
So I do think there are opportunities here.
And I’m going to tell a bank in an upcoming board session that it needs to begin developing a stablecoin strategy.
To me, that strategy has at least three components.
First, identify which current and potential business services could be affected by stablecoins.
Second, determine which systems and applications in the existing technology stack would be affected.
Third, identify which providers could help build the necessary stablecoin capabilities.
The big core providers are already coming out and saying they have stablecoin offerings. But given the level of dissatisfaction many institutions have with their cores, banks may be open to a broader ecosystem of providers.
And the stablecoin vendor landscape is full of names most community banks and credit unions have never heard of.
So just as institutions spent the last couple of years building AI strategies, it is time to start thinking about a stablecoin strategy.
That was a long rant. What do you think?
You gave a great example with Starbucks.
What Starbucks built shows the potential of digital stored value and loyalty. When you connect that idea to stablecoins, you can begin to imagine a much broader digital-asset playground.
U.S. Bancorp’s move tells me they’re saying, “Yes, we’re still a bank, but we also want to be able to move and manage money with the flexibility of modern payments companies.”
The company’s financial results may show stability, but the narrative shows ambition.
Embedded payments are scaling, and stablecoins are starting to look less like crypto weirdness and more like infrastructure.
And I’m hearing the same questions you are.
In strategic-planning sessions and board meetings, people ask, “What does a stablecoin strategy even mean? Should this be something we start exploring for 2026?”
There is a confidence gap.
We saw something similar with AI. The biggest hurdle was often not the technology itself, but the cultural mindset around adopting something unfamiliar.
Stablecoins create the same kind of uncertainty.
So institutions need to break the problem into pieces and become curious about the use cases other organizations are testing.
At FinovateFall in New York, I heard Beth Haddock from the Stablecoin Standard talk about this as a “moonshot” moment.
She compared it to President Kennedy’s 1962 commitment to reach the moon.
Her point was that stablecoins could reshape parts of banking, but confidence and operational readiness still lag.
Institutions need to think about legal and regulatory issues, reserve requirements, differences across jurisdictions, operational resilience, and the economic implications.
That all belongs inside the strategy.
I want to make one comment about U.S. Bank saying it is waiting to see where client demand develops.
I think that is the wrong approach.
Nobody is going to walk into a bank and say, “I want stablecoins.”
They’re going to say, “I need this faster. I need it cheaper. I need it more customized. I need fewer errors. I need better automation.”
Customers do not care about the infrastructure or the rail. They care about the outcome.
So you do not necessarily wait for someone to request the technology by name.
You build the capability so that when the need appears, you can solve it better than competitors.
That applies to stablecoins, faster payments, AI, or any other technology.
Business people care about results. Technologists care about the underlying technology.
That’s a great point.
When we think about what a smarter bank or credit union looks like, smarter growth and tighter execution will come from making payments so seamless that the customer barely notices the underlying mechanics.
Great. Next time, let’s put invisible payments on the list because I don’t believe in invisible payments, and I want to argue about that.
But we’ll leave it there for this episode.
Thanks, Stacey, for sharing your thoughts, and thanks to everybody for joining us. I hope you’ll listen to the next episode of What’s Going On in Banking.
If you enjoyed today’s episode, follow us on Spotify, Apple Podcasts, YouTube, or wherever you’re listening. We’ve got more conversations coming your way, and you won’t want to miss them.
Thanks for tuning in.
Enjoying What's Going On In Banking?
Subscribe on your favorite platform