"I Want to Work at a Bank with No Cross-sell"
Sales-oriented culture has had a ruinous impact on banking. We need a new model.
In 2010, I was managing digital marketing at a fintech startup. One of my jobs was keyword research — combing through all of the Google keyword searches that could conceivably lead a banker to our website, so that we could backwards engineer our content to rank well for those searches. Most of the relevant keyword searches I found were fairly straightforward, but there was one unusual one which I’ve never forgotten:
This wasn’t a bank executive searching for a new technology solution or information on emerging industry trends. This was a frontline bank employee working in a branch who was so frustrated with being forced to aggressively cross-sell every customer that they felt compelled to search for a bank that wasn’t forcing their employees to do that.
Customers, Not Clients
In retrospect, this keyword search was probably one of the earliest signals that something was rotten in the state of Denmark.
The head of the rotten fish, in this case, was Dick Kovacevich, CEO of Norwest Corporation and then Wells Fargo, whose fanaticism for sales transformed an entire industry:
As Kovacevich told me…the key question facing banks was “How do you sell money?” His answer was that financial instruments—A.T.M. cards, checking accounts, credit cards, loans—were consumer products, no different from, say, screwdrivers sold by Home Depot. In Kovacevich’s lingo, bank branches were “stores,” and bankers were “salespeople” whose job was to “cross-sell,” which meant getting “customers”—not “clients,” but “customers”—to buy as many products as possible. “It was his business model,” says a former Norwest executive. “It was a religion. It very much was the culture.”
Unsurprisingly, Wells Fargo has provided the most egregious examples of why aggressive sales incentives are a really bad idea. Between 2002 and 2016, Wells Fargo opened 3.5 million fraudulent accounts. These accounts were created by frontline employees who were under enormous pressure to hit sales targets that were, in some cases, mathematically impossible, as Yesenia Guitron, a Personal Banker at a Wells Fargo branch in Napa Vally discovered:
there were only about 11,500 potential customers in the area, and 11 other financial institutions. The quotas for the bankers at Guitron’s branch totaled 12,000 [sales] each year, including almost 3,000 new checking accounts. Without fraud, the math didn’t work.
Depressingly, Wells Fargo is far from the only bank to overlook a little fraud in pursuit of aggressive sales goals.
From the OCC in 2018:
A federal review triggered by the Wells Fargo scandal found that "weaknesses" at other banks led employees to open accounts without proof of customer consent…The probe of more than 40 large and midsize banks concluded that the cause of those fake accounts included "short-term sales promotions without adequate risk controls," deficient procedures and other isolated instances of "employee misconduct."
From the Wall Street Journal earlier this year:
Some AmEx salespeople strong-armed business owners…to increase card sign-ups, according to more than a dozen current and former AmEx sales, customer-service and compliance employees. The salespeople have misrepresented card rewards and fees, checked credit reports without consent and, in some cases, issued cards that weren’t sought, the current and former employees said.
And from the CFPB even more recently:
Branch employees were given sales goals and sometimes told their jobs depended on their ability to meet them, the CFPB alleged in the lawsuit. Employees earned money for hitting certain sales targets, according to the lawsuit. The agency said Fifth Third employees opened accounts and lines of credits without customer consent to meet those goals and sometimes transferred customer funds into the unauthorized accounts.
Your Reassurances Aren’t Reassuring
Every bank accused of fraudulently opening accounts pushes back by saying that they have robust internal controls designed to constrain this type of rogue employee behavior. Here’s AmEx:
“We have rigorous, multilayered monitoring and independent risk-management processes in place, which we continuously review and enhance to ensure that all sales activities conform with our values, internal policies and regulatory requirements,” he said. “We carefully examine any issues raised through our various internal and external feedback channels and audits, and we do not tolerate any misconduct.”
Speaking as a consumer, I find these types of statements deeply unsatisfying.
If you sat down in a movie theater (a sadly hypothetical example at the moment) and the first thing that came up on screen was a statement saying “we have rigorous, multilayered monitoring and independent risk-management processes in place to prevent you from being electrocuted”, you’d run out of there as fast as you could.
Banks talk about the possibility of aggressive sales incentives leading to fraudulent behavior as if it’s an unavoidable byproduct of doing business, a risk that can be mitigated but never fully eliminated. But that’s not true. Aggressive sales incentives are no more inherent to the operation of a profitable bank than shoddy wiring is inherent to the operation of a movie theater.
Does Cross-sell Even Make Sense Anymore?
Given the trouble that aggressive sales incentives cause for customers, employees, and companies, it’s worth asking — does the branch-based, incentive-driven approach to cross-sell (sans fraud) even make sense anymore?
As a business strategy, it’s based on a few outdated assumptions:
Assumption: Our employees frequently interact with customers, particularly in the branch. This is a great opportunity to sell!
Problem: This one is easy. Digital transactions are displacing branch transactions and, as a result, the overall number of bank branches is declining.
Implication: Relying on branch-based employees to sell new products to existing customers will become increasingly less effective. It also creates a nasty feedback loop — fewer branch visits leads to fewer sales which leads to more pressure on branch employees which leads to more desperate employee sales attempts which further disincentives customers from visiting the branch.
Assumption: Customers in our community may not know about all the financial products they could qualify for and will appreciate learning about them during interactions with our employees.
Problem: Today, customers have much greater access to information on financial products through third-parties like NerdWallet and Credit Karma and the massive amount of digital advertising from banks and fintechs that they are inundated with.
Implication: Customers are no longer dependent on their existing banking providers when researching and comparing financial products, thus cross-sell has little educational value to them.
Assumption: The more products a customer has with us, the less likely they are to switch to a competitor.
Problem: In the era of open banking and faster payments, attrition doesn’t mean what it used to. When it’s easy to open a new account and quickly transfer funds digitally, it becomes much easier for customers to move their spending behavior to a new provider without necessarily closing their existing accounts (h/t Chris Skinner):
An increasing number of digital challenger bank customers are using these banks for their discretionary lifestyle spending and leaving their boring transactions with their old bank. The issue this creates for boring old bank is that all they see is payments for taxes, utility bills and other annuity services, but none of your payments for things you enjoy in your life such as entertainment, consumption and lifestyle.
Implication: Number of products per customer has become a poor metric for accurately measuring the strength of banks’ relationships with their customers
You’re in the Outcome Business
So, if not through cross-sell, how should banks approach the task of strengthening customer relationships?
A common answer is to focus on improving the customer experience, but Jennifer Tescher has a different idea:
a good experience is different than a good outcome, and a good outcome is what builds trust. Companies should interrogate their products from the vantage of consumer outcomes to ensure that they are effective in improving financial health.
Put simply, financial services is becoming embedded (I said the magic word! Drink!) across a sprawling ecosystem of bank and non-bank service providers. The infrastructure underlying this ecosystem is being rapidly modernized, making it increasingly easy for consumers to move their money and data between providers.
In this environment, it’ll be impossible to own every product relationship and channel. Instead, banks should put themselves in position to help steer the choices customers make as they navigate that ecosystem.
To do that, banks will need to be laser-focused on understanding and improving their customers’ financial health outcomes, which, incidentally, sounds like just the kind of job that their employees would sign up for.