Wells Fargo has just been fined $185MM by the CFPB, (http://www.usatoday.com/story/money/personalfinance/2016/09/18/what-wells-fargos-185-million-settlement-may-mean-you/90521580/) Los Angeles city and local municipalities and is in some serious hot water. The CFPB will be collecting $100MM, the largest fine in the organization's 5 year history. After the financial crisis of 2007-2008 that caused the greatest recession since the great depression, Ponzi schemes and now this, how are everyday people expected to trust our banks again?
Customers of Wells Fargo had 1.5MM unauthorized accounts and another 565,000 credit cards opened that may not have permission to do so. The bank's employees went to the trouble of creating fake email accounts, fake pins, and opening fake online banking logins. They even temporarily transferred money into customer fraudulent accounts to open them and then back causing overdraft and other fees without permission. Many customers were charged annual fees and interest on the non approved credit cards that were opened as well, according to the CFPB. All of this effort to hit their bonuses by beefing up their sales numbers with these fake accounts.
Over 5,000 employees have been fired, staff monitoring have been changed and there will be new training on ethics and business conduct but what else could the huge bank do to help with their reputation? Here are 5 things I think all banks should start to initiate to avoid future customer hacking and great recessions. It is probably worth it, right? Remember FinTech is coming!
- Show Your Values Through Social Media: Instead of only pimping products and services promote your bank's core values as well. Millennials have been shown to do business with organizations that they share their values with and recently the banks seem to only value money. Bring back the trust that has been lost after the financial crisis and now this internal hack job and show what you stand for and how you support those values with your profits. Social is a great place to
- Change Your Sales Culture: There has been a ton of pressure for front line bank staff to be continuously up selling products and gaining a bigger slice of customers wallets. But where is the value to the customer in that process? If you have all of a customers business and then they leave because of poor value or service, it didn't serve your bank in the long run. Why not spend time creating a the most value for your customers. A happy customer will be willing to give you all of their business when they feel confident and safe with you.
- Teach Your Employees to Be Great Bankers Vs. Sales People: Wells Fargo is setting up a new training program to teach ethics and business conduct and it could be expanding that program to show employees how to master their career as a banker. People tell bankers things they wouldn't tell their priest and most of the job is being a really good people person vs. only working numbers. Give employees training in people, give them skills to analyze customer spending habits and how to motivate them to be better with their money and watch your profit soar. Having an extra credit card doesn't help someone heavily in debt but a consolidation loan and some money coaching might!
- Invest in Money Tools: Customers live on their phones and banks should be there to help. More advanced apps that help you track spending and find deals can ben a huge help. Provide online tools that go beyond rent vs. own and help customers make comprehensive plans to achieve their goals. Non banks like mint.com and PayPal have provided huge value with sophisticated apps and sites and banks need to take it to the next level. Banks need to provide the most value and convenience will keep their clients.
- Provide Mobile Customer Service: If before, we didn't want to go into a bank branch to wait in line to get a certified cheque, now we REALLY don't want to go into one if the teller is going to hack my account and open new products to hit their bonus. I can shop, date, get an Uber and more form my phone so why not fully bank? If I want to change my cell phone plan I can use Facebook messenger or twitter so why not my mortgage payment schedule or contribute to my retirement account. Proper service is where the people reside and the people are on their phones looking at cats with hats. It will be harder for employees to be dishonest when customer conversations are monitored and documented in a chat.
The big banks don't have many more cat lives to win back customer support and trust. FinTech is taking advantage of millennial angst around the industry and will keep pushing inward as new financial fiascos pop up. It's time for the banks to make big changes to their culture, values, service and how they raise their future bankers.
Have a fantastic week,