October 4, 2016
In my career as a marketer, I have had the opportunity to work with over a dozen banks, ranging from local community banks to regional banks, and even a well-known national player. Along the way, I became an admirer of Wells Fargo. I thought their mission, focus on understanding customers, and prioritization of customer’s needs was right on the money. I also admired their marketing sophistication as they adopted technology early to get a whole customer account viewpoint. Years before other competitors, they seized on this information technology advantage and established “winning customer share of wallet” as a priority KPI.
“Winning share of wallet,” or getting multiple account relationships per customer, is not an unethical goal. As the theory goes, if you satisfy customers’ needs, they will reward you with additional business. In banking, a checking account is an entry point. Banks much prefer to build upon that demand deposit account (a liability on their balance sheet) with new, margin-generating assets such as a personal, home equity or business loan. So what went wrong at Wells Fargo?
It is clear that winning customer’s share of wallet morphed into an out-of-control, cross-selling culture. This culture was fueled by incentives to employees and pressure to get results, even at the expense of customers. It was also stimulated by the use of the legacy business model that the largest public banks decided to continue with in order to keep profits growing and shareholders happy.
Dinging their less-sophisticated customers with fees became a profit center. But this approach only covered up deeper problems that large banks like Wells Fargo must deal with such as: a) supporting a large bureaucracy and brick and mortar infrastructure; b) adapting to lower net interest margins in a post-Great Recession rate environment; and c) investing in technology to compete with disrupters and to comply with regulatory and bank security challenges in a hacker’s world.
Tough problems, indeed. But the stated values of the bank were not operationalized throughout and a “profits before people” disease has now severely compromised the brand value of the company.
Now, reports by groups such as the Consumer Financial Protection Bureau are revealing that fraudulent practices, like those used by Wells Fargo, are also being used by other banks to protect profits. It doesn’t matter that Wells Fargo executives have pointed out that only a very small fraction of customer accounts had been affected; the damage to the brand is done and maybe irreversible.
Wells Fargo has fallen from high heights. In 2015, it was one of the world’s largest companies in market value. It was cited by BrandFinance as the world’s most valuable bank brand. Apparently, Wells Fargo got too big to value its customers.
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