Tag: data

Don’t Turn Cross-selling In Banking into A Villain | Sherpas in Blue Shirts

A critical factor behind the Wells Fargo fiasco was the incentivizing of employees based on their ability to achieve their sales targets by cross-selling products. While this is the easiest and lowest cost model for defining and measuring sales team performance, it can lead to fraud if left unchecked. In Wells Fargo’s case, over 5,300 employees were fired for fraud that occurred across multiple years and led to the exit of CEO John Stumpf.

The scandal raises serious questions. Did Wells Fargo not have the data and analytics tools needed to identify fraud that had been going on for so long? Did the bank’s processes not have a channel to capture customer feedback on transactions to raise a flag for the fraudulent activity? Can we create employee performance measures other than sales targets?

To answer these questions, I believe banks need to go back to services marketing basics 101:

1. Measure customer acquisition costs
2. Develop mechanism for measuring customer satisfaction (in almost real time, on an ongoing basis for consumers in the age of connected ecosystem)

If Wells Fargo had measured the cost of acquisition per customer and had the ability to drill down at the sales representative level, it would have realized that the 5,300 fired employees had unbelievably low cost of customer acquisition for the sales they made over the years – meaning they were doing amazing, or fraudulent, work. Whichever the case, the bank would need to explore further.

These days, measuring customer satisfaction after every transaction is the norm in many industries. After every call I make using Skype, the application asks me to rate my experience. The same is true for every Uber ride I take, and each time I book a flight online.

Can’t banks do this? I believe they can. It makes sense for multiple reasons:

1. In the age of agile development and DevOps, driving continuous integration and continuous deployment the customer feedback loop needs to be real time for the customer experience and service design teams to actually drive continuous improvement of their systems
2. This helps banks develop a rich data set that can be used to drive process and product design and improvements, and also identify fraud
3. The data can help improve the customer experience, and demonstrates to consumers that their feedback is valuable. Customers can be enticed to leave feedback through offers of loyalty points, which in turn can help improve customer retention
4. This approach drives customer centricity, and ensures designing processes that are aligned to the needs of customers
5. Banks can use this data to predict the need for different segments of customers, and help drive personalization of user experience

While there are many more reasons why measuring customer satisfaction is valuable for banks and customers alike, let’s dive a little deeper into the idea of using it to measure sales team performance.

Banks can use the customer satisfaction measuring mechanism to capture feedback that enables measurement of the effectiveness and value added by the sales team member across the customer lifetime journey, from being on-boarded to systems to purchasing products to retiring products.

By embracing a customer-centric design philosophy for all its internal processes (not just for its products and services), including performance appraisals of all employees, with every KPI being linked to customer satisfaction, banks will be able to create a consumer-centric enterprise.

True that Wells Fargo’s case has made the idea of cross-selling a villain. But we must realize that its debacle was also caused by other more pressing issues such as top management failure to respond to the matter in time, lack of data and analytics solutions to identify fraudulent transactions, and the organization culture that promoted unethical behavior.

FinTech players in the market are looking to disrupt traditional financial services players by leveraging technology and designing for customers. However, they face challenges in terms of gaining customer trust and loyalty while building scale. Traditional banks boast of having scale and years of customer trust. But, we are witnessing erosion of that trust. While financial services enterprises are investing heavily to embrace the wave of digital disruption from FinTechs, they need to ensure while they pursue this strategy they continue to protect their competitive advantage of years of customer trust.