Wells Fargo has paid a hefty price for its fake account scandal.
While the bank has fired more than 5,000 employees implicated in the scandal, clawed back $75m in compensation from executives it blamed for the fraud, and agreed to pay $110m to settle a class action lawsuit over its opening of more than a million unauthorized customer accounts, consumers apparently aren’t willing to forgive the company, at least not yet.
Wells Fargo recently revealed that new checking account openings have dropped by 43% year-on-year and new credit card applications have plunged by an even greater amount – 55%.
According to some observers, dealing with the fallout from this scandal represents perhaps the biggest challenge the bank has faced since it was founded in 1852. Ironically, the scandal could have been avoided if the company had heeded the advice of its largest shareholder, Warren Buffett. The legendary investor famously once stated, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”
Now faced with the task of rebuilding its reputation, Wells Fargo has unveiled a new brand platform dubbed Building Better Every Day.
According to Jamie Moldafsky, Wells Fargo’s CMO, “Our research clearly shows our customers are ready to hear a different message from us, and the ‘Building Better Every Day’ platform behind this advertising came directly from the research results. In addition to showing our customers how we are building a better bank – fixing things, and making them right – this effort is focused on how we are helping customers achieve their financial goals.”
The Building Better Every Day platform will rely on marketing across virtually all channels, including digital, television, print, radio and billboard. It aims to highlight how Wells Fargo is helping customers through “customer-centric” technological innovation, guidance and personalized service, security and community involvement.
Phil Wang, a marketing manager who was involved in the platform’s development, says that the ads will focus a lot on interactions between Wells Fargo and its customers. “Team members are front and center in these spots, and portrayed as helping customers in a way that’s in keeping with our vision and values.”
To hammer home the bank’s commitment to the diverse communities it has a presence in, Wells Fargo is even creating ads for specific audiences in other languages, including Mandarin, Cantonese and Spanish.
All of this sounds like a textbook plan from a marketing perspective, but will Wells Fargo’s new brand platform really heal the damage caused by its scandal?
There are reasons to be skeptical because not only was the scandal itself really, really ugly in nature, the timing couldn’t have been worse for the banking behemoth.
First, big banks are among consumers’ least favorite institutions today thanks in large part to the financial crisis of 2008, which was widely blamed on out-of-control financial institutions. While Wells Fargo had the most pristine reputation of any big bank following the crisis, having emerged from the Great Recession largely unscathed, the unauthorized account scandal plays right into Wall Street critics’ argument that big banks are out of control and simply can’t be trusted.
Secondly, and perhaps more importantly, banks find themselves under attack from fintech startups that are attempting to disrupt their business models. From consumer, business and mortgage lending to brokerage services and everything in between, many of the financial services that consumers used to obtain from the bank where they kept their checking and savings accounts are increasingly acquired through standalone non-bank service providers in an unbundled fashion. By some estimates, this could soon cost established financial institutions a quarter of their revenue.
In fact, that Wells Fargo employees were opening unauthorized accounts to meet aggressive sales quotas hints that it is increasingly difficult for banks to successfully cross-sell to their customers in the age of unbundling.
Unfortunately for Wells Fargo, the damage caused by the actions of thousands of its employees probably won’t be undone with a new brand platform and an aggressive and expensive marketing campaign. While it’s not too soon for the bank to start employing marketing in an effort to re-engage consumers, ultimately Wells Fargo will probably have to accept that the old Buffett nugget of wisdom is pretty accurate.