Many banks focusing on new accounts — and fees
Low interest rates prompted new revenue sources
NEW YORK — Wells Fargo is in the spotlight now after its employees allegedly opened up to 2 million bank and credit card accounts, transferred customers’ money without telling them and even created fake email addresses to sign up people for online banking in an effort to meet lofty sales goals.
But cross-selling, as it is called, is the lifeblood of the entire retail banking industry. Other banks don’t face allegations of fraud, like Wells Fargo is, but experts say the industry as a whole engages in high-pressure sales tactics. Once customers open a basic savings or checking account, banks give them the hard sell to sign up for even more, whether that’s a credit card or a mortgage or a retirement account.
Overdraft protection was one common tactic, former Wells bankers said, telling customers to open an additional savings account to put aside money to cover overdrafts even though the customer didn’t have the resources to fund the account. Or getting the customer to open a new credit card just for overdraft protection.
Surveys done last year by consulting firm cg42 showed that roughly 40 percent of Wells Fargo customers said their No. 1 complaint was employees’ constant pushing of products the customers did not need or want. But customers at other banks made similar complaints. Of Bank of America customers, 31 percent said they felt overly pressured for products they didn’t want or need. At both Chase and Citigroup, that figure was 27 percent.
“Bank of America, Citi, Chase were all envious of Wells’ ability to cross-sell as well as they did,” said Steve Beck, a managing partner with cg42.
The change in focus for retail banks had been taking place slowly for years, but the financial crisis that began in 2007 and the impact on banks fueled faster change. The Federal Reserve’s cutting interest rates to nearly zero gave the economy a boost during the Great Recession, but it also eviscerated the banks’ ability to earn interest income, spurring them to seek out new forms of revenue — often in the form of fees.
A benefit for the industry is that having several products with a bank makes it more difficult for customers to switch banks, said Bob Hedges, a banking industry consultant with A.T. Kearney.
Ruth Landaverde, a former worker at both Wells Fargo and Bank of America, said the pressure was intense at both places. She worked for Wells Fargo from 2009 to 2010 at a division that sold products like credit cards to existing customers. Stress got so high that Landaverde said she developed a tic in her eye and sleep problems. “I wasn’t going to do something unethical, but the sales pressure was very real,” she said.