Is the Wells Fargo Scandal Making People Reconsider Their Bank?
The financial industry was rattled earlier this year when news broke that Wells Fargo employees had pressured customers into creating, or in many cases secretly had created, over $2 million worth of fraudulent accounts in order to meet sales goals. Once known as “Main Street’s Favorite Bank,” Wells Fargo now stands to lose billions in the wake of the scandal.
Illinois and California have already punished the bank with a one-year business moratorium. And Illinois is taking it a step further by withdrawing approximately $30 billion worth of transactions from Wells Fargo. Louisiana Senator and member of the U.S. Senate’s Banking Committee, David Vitter, estimates that thousands of business owners were impacted by the fraud. After a probe into the bank’s activities, Vitter demanded that recently resigned CEO John Stumpf provide a full accounting of affected customers.
A study conducted by cg42 on the impact of the scandal estimated that the bank could potentially lose up to $99 billion in deposits, $4 billion in revenue, and 30% of their customer base. Prior to the scandal, 60% of survey respondents had a positive impression of Wells Fargo, but that number recently dropped to 24%.
Can Wells Fargo, Or Any Bank, Be Trusted?
As customers assess alternative banking options, one market that has seen a rise in business is African-American-owned financial institutions. What began as a community initiative grew into a movement that resulted in 1,500 new accounts being opened in just one month at Industry Bank, amounting to approximately $2.7 million in deposit balances. This movement is just one example of how consumers, particularly millennials, are using their purchasing power to support causes that are important to them.
Through pioneering companies like Tom’s Shoes and Warby Parker, social consciousness among consumers has been especially prevalent in the fashion retail industry. And now it’s spreading across all industries, including banking. More than ever, consumers are looking for financial institutions they can trust. Mobile financial services like Meed are developing new models that hold banks accountable to their customers. Meed partners with banks around the world to deliver innovative and socially conscious mobile banking services that help consumers — not just the banks — build wealth. To become one of Meed’s Member Banks, a bank must offer the set of services as they have been designed by Meed, which includes things like no overdraft fees, no minimum balances and the unprecedented SocialBoost feature.
The damage to Wells Fargo’s reputation has been devastating, and even though the bank promises reforms along the lines of increased transparency and the end of sales goals, consumers and businesses remain skeptical. Banks are increasingly feeling the pressure, and some are now partnering with more reputable fintech companies that are committed to putting their customers’ financial needs first. Whether or not customers permanently jump ship from Wells Fargo and other banks, they are in for a steep uphill battle to maintain customer loyalty.
Fortunately, we are in the midst of a financial services revolution that is bringing new and better alternatives everyday. Who knows where and how we’ll be banking a few years from now!