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Wells Fargo's ongoing fraud scandal, which involved the creation of 2m fake accounts by bank employees, demonstrates some of the reasons banks are vulnerable to fintech startups.
But there are lessons that all companies can learn from Wells Fargo's woes. Here are five of them.
Sales goals aren't bad, but...
In the wake of its scandal, Wells Fargo has vowed to end retail banking product sales goals.
"We are eliminating product sales goals because we want to make certain our customers have full confidence that our retail bankers are always focused on the best interests of customers," Wells Fargo CEO John Stumpf said in a statement.
But sales goals aren't inherently bad, and Stumpf's statement seems to take the misguided view that sales goals are in conflict with the interests of customers.
That isn't the case.
What is bad are sales goals that are unrealistic and that employees don't believe they can meet.
The fact that over 5,000 Wells Fargo employees were fired for being involved in the creation of more than 2m fraudulent accounts strongly suggests that Wells Fargo's sales goals were either not tied to reality or that the employees asked to hit them didn't feel they had the support and resources needed to do so.
Indeed, one former Wells Fargo employee said that she was told to increase sales 35% each year, a nearly impossible task given that she was in a small town with a finite customer base.
You need good products to cross-sell successfully
In response to the crisis it faces, Wells Fargo has also instructed employees to stop cross-selling.
A memo sent to some Wells Fargo call center employees stated "please suspend referrals of products or services unless requested by customers until further notice."
While that move may be advisable for Wells Fargo given the current situation, here too it's unwise to draw the broader conclusion that cross-selling is bad.
The reason it was so problematic for Wells Fargo is that the bank was cross-selling products consumers in many cases didn't want, or wouldn't want if they knew what they were buying.
For example, one of the products that employees reportedly pushed hard to customers was overdraft protection, a "potentially costly" offering "they didn’t always need or realize they were getting."
Effective cross-selling involves the promotion of quality products that customers might want or need based on their profile or purchase history.
It does not involve deception or the pushing of products for the purpose of maximizing revenue without maximizing customer value.
Commoditisation sucks, especially when you don't deal with it
Wells Fargo's apparently unrealistic sales goals and aggressive cross-selling belied a harsh but simple truth: Retail and business banking are increasingly commoditised.
Commoditisation is challenging in any industry, but it doesn't have to be a death knell.
Wells Fargo could have recognised the nature of the market it is in and implemented customer-focused strategies, but instead, the giant bank appears to have assumed that its existing customer base was an easily exploitable asset that it could take advantage of without consequence.
That was a huge mistake.
Fear and pressure are not viable employee incentives
According to Khalid Taha, who worked as a personal banker for Wells Fargo in San Diego for three years, "I had to meet quotas every day, if I didn't then I could be written up and fired."
His story mirrors that of other former employees who are speaking out.
Many of the rank-and-file workers who were involved in signing customers up for phony accounts didn't have nearly as much to gain monetarily as Wells Fargo executives, one of whom retired with a $125m payday.
Instead, the picture that has emerged is one in which most employees who were engaged in the phony accounts scheme were doing so primarily because they felt fear and pressure, which should never be used to motivate employees who are responsible for selling.
A reputation can be destroyed in an instant
Wells Fargo has long been considered one of the most conservative of the large US banks, and emerged from the financial crisis of 2008 with far less reputational damage than most of its peers.
But now, Wells Fargo has been turned into the latest poster child for everything that is wrong with the banking industry, proving what billionaire investor Warren Buffett once observed...
It takes 20 years to build a reputation and five minutes to ruin it.
Ironically, Buffett's firm, Berkshire Hathaway, owns 10% of Wells Fargo, making it the bank's largest shareholder and the biggest loser in the decline of Wells Fargo's stock.
Buffett once stated, "Lose money for the firm and I will be understanding. Lose a shred of reputation for the firm, and I will be ruthless."
Buffett hasn't yet spoken publicly about the Wells Fargo scandal, but if the octogenarian investor lives by his past words, Wells Fargo's reputational woes could quickly become even more costly.