A Wells Fargo executive shares his thoughts on serving retail banking consumers across different channels, improving the customer experience, and increasing cross-sell effectiveness.
While most retail banks are closing branches and reducing staff, Wells Fargo continues to improve customer satisfaction, growth, and operational efficiency in its physical channels. Why is Wells Fargo doing things differently and succeeding? How does Wells Fargo’s retail banking strategy shape your store and ATM service model?
Jonathan Velline: If you look at our results, we think that there is a tight correlation between exceptional customer experience and the top line revenue results. Our customer satisfaction and loyalty across our channels are at or near all-time highs.
Customers don’t choose banks because they’re really good at saving costs. Customers choose banks because they receive outstanding service. Our customers don’t come to us and say they want limited choice. They come to us and they say “the bank that offers me the most choice and most convenience is the one I want to be with”. That’s how we grow our relationships.
When our customers succeed, we succeed. As we reported for Community Banking at our Investor Day in May this year, over the past two years between 2013 and 2015, our number of primary checking customers was up 11%. Deposit balances were up 13%. Digital product sales were up 17%. And, total revenue was up 9%.
At the same time, Community Banking’s team member turnover improved by 2.8 percentage points. Retail checking household attrition improved by 1.6 percentage points. And, our efficiency ratio improved by 2.8 percentage points.
Wells Fargo’s overall retail banking strategy is to empower the customer to choose where, when, and how they want to engage with us and to provide outstanding service regardless of the channel. Our store and ATM banking service model is consistent with that strategy.
As you know, our physical distribution continues to be the source of about 85% of Community Banking’s new sales or referrals. We have over 600 million transactions a year done by our tellers in the retail banking stores. We’re meeting that demand with great service. We have nearly 900 million ATM transactions a year. And, we’re meeting that demand and expanding with capabilities like assisted service. In addition, we have tremendous growth in our digital channels.
So, we are weaving customer experiences together using digital technology even when they are inside a store. We believe that this service model does two things for us. One, we meet the customer where they want to be. And, two we make it easy for them to move across channels.
The language you use is different than other banks. You operate stores, not branches. You have team members, not employees. Clearly, these are more than just marketing talking points.
Jonathan Velline: What you’re describing is who we are – we are America’s community bank. We happen to be a very large community bank. We have over 6,000 retail banking stores and 13,000 state-of-the-art ATMs in 39 states plus DC. Over half of the US population (small businesses and US census households) in our footprint are within two miles of a Wells Fargo retail banking store or ATM.
So, we have this huge reach to be able to serve our communities. And, we take that very seriously. We feel like we’re part of the communities. We’re out there to help our customers and communities succeed financially.
A lot of that is having an engaged team in our stores, in our communities interacting with our customers to meet their needs and to create lifelong relationships. That’s something that is complimented by our digital strategy. When you talk to other banks, they’re very focused on digital or mobile strategy. We are too. But we don’t do that at the expense of our core retail banking model.
Everyone talks about how rapidly branch visits are declining. What can you tell me about how your customers are using your physical channels?
Jonathan Velline: More than half our deposit customers use three or more channels every six months. About 1.5 billion of our Community Banking customer interactions are in physical channels. Approximately 75% of our deposit customers visited a banker or teller in a Wells Fargo store in any given six month period.
Everybody assumes that millennials don’t want to use the stores. We see where millennials go. We have the data. We know they use our stores. 63% of deposit customers ages 18-34 use our stores. 71% use the ATM. That’s pretty close to where a Gen Xer would be in terms of usage. 68% of 35-50 use our stores and ATMs. So, it’s five percentage points difference for store usage. It’s not like this stark contrast where millennials are mobile only and Gen Xers are store only.
In fact, when it comes to online and mobile, 35-50 year olds use online 62% and mobile 50% of the time and 18-34 olds use online 67% and mobile 72% of the time. So we have, across all generations, highly engaged customers who interact with all of our channels.
Many suggest shifting physical transactions to digital channels and completely eliminating tellers is necessary to achieve operational. How do you justify still having tellers?
Jonathan Velline: I think where the industry gets caught up is they look at the average cost of a transaction. They look at the statistics and say an ATM transaction is cheaper than a teller transaction or mobile transaction is cheaper than an ATM transaction. They make the logical connection that we should simply move everything towards mobile.
We look at it differently. Of course, tellers and ATMs are more expensive than mobile but that doesn’t mean customers don’t want teller service or they don’t need access to cash, or that they don’t find value in that channel. What we try to do is to maximize the value within each channel. We ask ourselves questions like, how do we provide teller service or ATM service as efficiently and effectively as possible? And, recognizing that customers move in and out of these channels based on what’s convenient to them, how do we make these connections as easy as possible?
Research shows customers are more engaged when their banking relationship matches their preferences. Most customers prefer a mix along the continuum of self-service and personal service.
“The better you serve your customer, the more value they get, and the better business results we get.”
— Jonathan Velline, EVP of Wells Fargo
You know, we made the teller transaction look like the ATM transaction. We’ve done away with the paper slips. We have a pin pads which mimic the ATM experience. From the customer’s perspective, it’s a little ATM. The only difference is there is a smiling teller behind it who can do more complex transactions and build relationships with customers. That’s the difference in our model. We respect the fact that customers want to use these different channels. When this happens, there is a greater exchange of value between the customer and the bank.
We’ve actually done extensive research and analysis around what we call “customer intensity.” Think of it as a measure of how many channels the customer uses – the “breadth” – and the transaction types they use – the “depth.” Customers who use multiple channels and transact more derive increased value and generate better business outcomes.
For example, retail checking households with high intensity, defined as using 3+ channels and 9+ transaction types, have 2.4 times the purchase rates of those with low intensity, those using 0-2 channels and 3 or less transaction types. They are 24 percentage points higher in customer retention, and 3.7 percentage points higher in terms of rating that they would refer a friend or associate to us. They are 1.7 times more profitable per household.
So, you have this dynamic, which is, the better you serve your customer, the more value they get, and the better business results we get.
You are an analytics guy — you mentioned efficiency and effectiveness. How are you using analytics for workforce optimization and greater operational efficiency?
Jonathan Velline: We care about costs, but we don’t only care about costs. The ATM is a fixed cost whereas the teller is a flexible cost. If an ATM is under-utilized, it could be just as expensive as a teller. We want to optimize the utilization of all resources whether it be a teller, ATM, or banker. The way we do it is through advanced analytics.
The work that we do with our advanced analytics platform helps us build workforce optimization models that address efficiency while providing a great experience for the customer.
The field studies help us analyze how customers arrive and move through our stores, how much time they spend with tellers, bankers, or ATMs, and the dynamics of customer interactions. As a result of the field studies and your advanced analytics, we are able to understand the value of a team member in every service transaction. That’s critical to making sure we don’t have too much or too little resource capacity.
Optimizing our workforce is a shared accountability. We have a lot of respect for local decision making capability of our store managers. Using our workforce optimization solution, our centralized group provides the analytics-driven transaction and resource forecasts to the store managers. These forecasts include weekly, daily, and half-hourly staffing guidance. Our store managers then utilize these models and complement it with their unique knowledge of their community (like special events) to develop team member schedules and decide how to run each store in an optimal way.