A Growing Demand for Online Account Opening

A Growing Demand for Online Account Opening

Wells Fargo scandal sparks change in how people want to bank.

The fierce public outrage from the Wells Fargo new account scandal caused significant damage to their reputation and implications for the banking industry as a whole. Wells Fargo was fined for illegal practices that stemmed from their corporate culture of high sales quotas, which motivated frontline employees to cheat in order to boost numbers by opening accounts without customer authorization. Wells Fargo was cited specifically for violating consumer protections included in the Dodd-Frank Act that prohibit financial institutions from engaging in unfair, deceptive, or abusive acts or practice, known as UDAAP.

 

Banks are under a microscope

 

With this colossal breach of trust, Wells Fargo became the perfect poster child for the Consumer Financial Protection Bureau (CFPB) to showcase what they do and why it matters. Putting the rest of the industry on notice, the CFPB has pledged to step up their examinations of bank sales practices and to pursue other financial institutions that are taking advantage of consumers. With the regulatory spotlight on UDAAP, all banks must look at their sales practices and make adjustments as needed. Changing a sales culture that is deeply ingrained in retail banking is no small undertaking and will take considerable time and staff retraining. To make matters worse, this all comes at a time when the banks, still reeling from the regulatory reforms that followed the 2008 financial crisis, are under intense pressure to grow revenue.

 

Digital account opening is no longer optional

 

With handcuffs on the frontline staff, the value proposition for online customer acquisition just got more attractive. For some time, online account opening has been an important tool to reach digital-only consumers and allow financial institutions with a limited branch footprint to compete effectively. Since the Wells Fargo scandal, it is expected that more and more consumers will prefer to interact with their bank through an online channel, where they feel more in control and not at risk of being worn down by aggressive sales tactics, or worse yet, duped by the banker.

The regulators are fired up and will be looking at sales practices for UDAAP violations across all channels. A key advantage for the online sales channel is that the rogue human element is not a part of the equation. UDAAP compliance for online account opening can be thoughtfully implemented with technology and audited centrally. While the tough times for banks just got tougher, this turmoil may translate into opportunities for financial institutions ready to connect with consumers looking for a change. Chances are that fed-up consumers will be looking online instead of walking through the doors of the branch.