Bankers call it “stickiness.”
The term describes how likely a customer is to stick with his current financial institution. When a customer has numerous accounts – checking, savings, credit card, car loan, home loan, certificate of deposit – the relationship is very sticky. Switching banks, at that point, can feel like too much work.
Experts say stickiness could help explain why after months of revelations about misdeeds at Wells Fargo, the San Francisco-based bank is still No. 1 in the Allen County market.
As of June 30, more than $1 of every $4 in an Allen County bank – or $1.86 billion – was on deposit at Wells Fargo, according to FDIC data.
Even so, the bank’s market share fell by 20 percent compared with the previous annual deposit report. Experts described the drop as significant. Seven of the remaining nine Top 10 banks picked up market share in the latest report.
So it appears some customers have been influenced by the federal investigation into employees opening unauthorized customer accounts to meet corporate-mandated performance goals.
A Wells Fargo spokesman explained away the 7-percentage-point decline, saying it reflected business or institutional accounts – not consumers’ money – that were moved to another state. Otherwise, he said, consumer deposits actually increased during that 12-month period.
But Steve Carlson acknowledged that Wells Fargo still has “work to do” to repair its reputation.
The scandal went public in October 2016, when Wells Fargo announced it had reached a $185 million settlement with federal regulators and the city of Los Angeles in response to allegations employees created millions of fake customer accounts.
The seeds of the problem were traced to CEO John Stumpf’s motto: Eight is great. He wanted every Wells Fargo customer to have at least eight accounts or connections with the bank. Employees were evaluated on whether they successfully pushed customers to increase their ties.
Some Wells Fargo workers opened accounts and credit cards in customers’ names without their knowledge or permission. The employees, some of whom registered complaints, said it was the only way to keep their jobs.
Officials say that from 2011 to mid-2016, about 2.1million unauthorized accounts were created, including credit cards. Combined, they generated $2.6 million in fees for the bank.
Before the end of last year, Stumpf and Carrie Tolstedt, the executive who ran the community banking unit, left and were told to repay some of the bonuses they’d received.
But the dust hasn’t settled. Another 1.4 million fake accounts were uncovered in August. The same month, stories emerged that Wells Fargo signed up half a million – or more – auto loan borrowers for unnecessary insurance coverage.
If the consumers failed to pay premiums for policies they didn’t know they’d been signed up for, Wells Fargo repossessed their cars.
Wells Fargo officials are working to shore up the 165-year-old company’s battered reputation.
“Wells Fargo continues to work hard to make things right, build a better bank, and earn back the trust of our customers, team members, investors, government leaders and the American public,” Carlson, the spokesman, said in an emailed statement.
“Although we’ve made significant progress in transforming our operations, there is still work to do as we address the issues and remediate the impacts to customers resulting from past unacceptable retail bank sales practices,” he said.
The bank declined to make Mary Bell, Indiana-Ohio regional president, available for an interview.
Carlson included a timeline of the organization’s actions to address what it described as “improper sales practices.” For example, bank officials announced in September 2016 that all sales goals would be abolished as of Jan. 1, 2017.
Carlson also pointed to data that seem to show the bank is on the right track. Or, at least, that consumers aren’t punishing it too much.
“We are pleased that Wells Fargo continues to enjoy a large and stable core deposit base,” he said. “Nationwide in 2017, we saw our customers keep more deposits with Wells Fargo than they did in 2016.”
Turning to the local market, Carlson said: “The decrease in Wells Fargo’s deposit base in Allen County was primarily due to a significant transfer of non-retail funds from our branch at 111 E. Wayne St. in Fort Wayne to a location in another state.”
“Our retail deposit base in Allen County grew during this time period and, apart from this transfer, our overall deposit base in Allen County would have grown slightly as well,” he said.
John Kaufeld and his wife opened accounts in Indianapolis-based Salin and Fort Wayne-based STAR banks when they moved to Fort Wayne more than a decade ago.
Not only did both have branches near the Kaufelds’ new home, but “they seemed to have more northeast Indiana connections compared to the big banks,” he said.
Kaufeld said he was shocked when he heard about Wells Fargo bankers opening unauthorized customer accounts. Previously, he’d considered banking a highly trustworthy profession.
If Salin or STAR were named in a similar scandal, Kaufeld said, he “would definitely reconsider” his choice.
Cara Key, also of Fort Wayne, faced that situation.
The founder and CEO of Epiclassy, an online marketing consulting firm, is a longtime Wells Fargo customer. Key has maintained her account even though she was a victim of the student loan fraud case brought against Masters of Cosmetology beauty school.
That experience made her nervous, she said, but when she didn’t receive a letter informing her that she’d been victimized again, she relaxed.
She appreciates the level of service her local branch provides, including contacting her if a check is about to bounce. Because of the alert, Key has been able to avoid some fees.
“I just feel like the support system there is really helpful,” she said.
Ting Zhu, an associate professor of consumer behavior at Purdue University, thinks there are two possible explanations for Wells Fargo retaining its spot as the county’s top destination for bank deposits.
The inconvenience of switching banks, she said, is high. It takes time to change direct deposit and automated payments deducted regularly for mortgage, insurance and utility bills. Also, Zhu said, customers can develop deep loyalty to a local branch, refusing to believe the workers who sit across a desk and look them in the eye could be involved in anything illegal.
Steven Blue, a business transformation expert and author who works in Minnesota, said any Wells Fargo account holder has to wonder whether they were affected.
“There’s enough cyber theft out there, you don’t need your own bank pulling that stuff,” he added.
Blue, who is on the board of a small bank, questioned whether Fort Wayne-area residents have made the mental leap to associate local Wells Fargo employees with unauthorized customer accounts opened elsewhere.
“For all you know, Tom at your Fort Wayne branch … did something like that,” he added.
Considering all the hassle involved in changing banks, would Blue have gone to the trouble if he’d had accounts with Wells Fargo?
“Absolutely,” he said.