3 Reasons Banking Sector Needs A Reform: Wells Fargo & Co (WFC) And Deutsche Bank AG (USA) (DB)
The banking sector is undergoing a unique crisis- one that is ingrained in its system. To get over this self-sabotaging crisis, the banking sector would need a total revamp. The system is extractive and exploitative in nature and comes with many loopholes that are exploited to frame customers and the bank too. A similar case was reported in Wells Fargo & Co (NYSE:WFC), where 5300 employees were fired because of a ghost account fraud. The incident led to numerous doubts in banking sector. Here are top three reasons why the banking sector needs a revolutionary and quick reform.
Fraud continue to gallore
The Wells Fargo & Co (NYSE:WFC) fraud clearly outlines the problems with the banking sector. Employees have heavy targets to meet and the lack of real consumer advocacy leaves them with one option to save their jobs and earn handsome salaries. Deutsche Bank AG (USA) (NYSE:DB) was involved in a similar fraud where wealthy Russians dumped $10 billion offshore. This billion-dollar fraud helped many Russians avoid taxation from the government and put it away in places like Cyprus. The Libor Scandal involved as many as 16 top banks and helped in manipulating interest rates of financial instruments worth trillions of dollars. These scandals, revealed over the past few years, have lowered public faith in banking system where interest rates are rigged to suit the needs of big banks.
No consumer advocacy, no real interest
Consumer advocacy is one area where banks need to focus. The interest rates offered by banks are nowhere near interesting (pun intended). Millennials are the future of banking but they have already ditched the traditional banking system and looking for more transparent and honest treatment elsewhere. Even if they use banking services, they are reluctant consumers who simply haven’t found greener pastures. Per the Millennial Disruption Index, 63 percent of this demographic does not own a credit card and 53 percent feel no customer loyalty towards their banks.
Their savings rate is -2% as per Moody’s analytics. The banks are doing nothing to increase the rate of savings or offer lucrative interests to the customers. Again, banks are simply charging customers and not standing up for them. The banking industry needs a robust customer relationship management system which helps in developing loyalty. It should create an environment where users can grow their wealth and get real information about their finances.
Banks charge for everything. There is a fee for operating an account, using ATMs by other banks and even for talking to tellers. This makes banking a very pricey luxury to own for many. Even though banks primarily depend on their services, they are neither transparent, nor honest. Additionally, banks have a punitive approach towards their customers. They are extractive in nature which drives an average customer away or digs too deep into their pockets. When the banks keep charging so much from customers with small incomes, savings will be discouraged and people with stick with banks for the heck of it.
The banking sector needs to adopt real strategies to help customers. Botching up a troubled trade, especially after the 2008 crisis and with low level of savings will only make things work in their disfavor. Watching out for startups that adopt a nimble and agile approach to finances will be better. As more customers are driving towards mobile banking, banks need to develop secure technologies that help safeguard their customers. In a recent tie-up Wells Fargo and Intuit have joined hands to provide password less access to more than a million bank customers by integrating the two platforms. Wells Fargo & Co (NYSE:WFC) has taken a step in the right direction by using technology to allow third party integration into their own services and provide better banking services.
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