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Banks sell services—not products

And in light of the Wells Fargo affair, that’s critical to understand

Stop selling like you're in the shoe business. Bankers' stock-in-trade is service, and remembering that gets the customer relationship off on the right foot. Stop selling like you're in the shoe business. Bankers' stock-in-trade is service, and remembering that gets the customer relationship off on the right foot.

We’ve asked several Banking Exchange bloggers and other contributors to examine the Wells Fargo affair from the vantage of their areas of specialty. With this entry in our series, a new blogger, Mike Moebs, “The Prairie Economist,” an economist and CPA—and former Wells Fargo banker—weighs in on a critical issue bankers can’t overlook as their reflect on this ongoing story.—Steve Cocheo, executive editor and digital content manager

There is much consternation over Wells Fargo’s sales practices, but I believe a core, real issue underlying the problem starts with how the bank defines what it sells. And this issue of definition is not unique to Wells. Chances are, your bank thinks of sales in the same way, and you may not even realize it.

Services, not products

John Stumpf, CEO & chairman, said repeatedly in his Sept. 20 testimony with the Senate Banking Committee that Wells sells products. Along with him, every Senator and Consumer Financial Protection Bureau personnel referred to the improper sale of “products” by Wells.

When was the marketing revolution occurring that transformed banks from selling services to selling products?

Loans, deposits, retirement accounts, wealth management, insurance, securities, trading desk exchange, and others are intangible services.

The ongoing nature of having to provide services to the consumer makes this more than a product, but a service.

Why is this distinction important?

Products are tangible commodities, similar to a retail store selling clothing, where an item can be sold and the buyer is never seen again.

Services are more than the sale of an item; it is the relationship that comes with a service.

In the financial industry, this is key when determining how sales incentives are structured. If you are structured to sell products, not services, you can run into similar problems like Wells’ issues.

Services, like a checking account, are opened one day and serviced until the customer closes or transfers their account. Many customers stay with their bank for an extended period of time, requiring service for years.

Wells believes there were approximately 5,300 employees who did not adhere to its sales policies and culture. Yet, could the root of such offenses in part be a matter of executing the wrong sale—thinking the bank was delivering a product, not a service?

Could proper focus have averted calamity?

This is more than a matter of corporate attitude, and I am not endorsing sales of shoddy products. There’s a key compensation element here.

If Wells structured incentives for the sale of services, the commissions would have been paid out over a longer period of time. This is more in line with the relationship aspect of the financial service.


• If emphasis was placed on not only the sale, but the ongoing servicing, would the front-line employees have felt as much pressure to fill sales quotas?  

• If commissions were paid out over an extended period of time, then isn’t it reasonable to believe the fraudulent few could have been identified early?

7 key points to remember

Wells has created an opportunity for all depository institutions to learn from their selling blunder:

1. You sell services, not products.

2. Products are tangible, but financial services are not.

3. Banks should establish customer care teams.

 These would consist of a salesperson and an ongoing customer service representative. The team is compensated over a period of time for both the sale of the service and the ongoing customer service.

4. Services are an ongoing relationship.

The sales cycle of a bank customer can include a checking account, a credit card, an auto loan, and an IRA—all over a period of time that could be several years.

These are three distinctly different services: transaction, borrowing, and retirement. Yet, all three form relationship selling of services with one customer or household.

5. Service compensation is long-term incentive based.

6. Sell a checking account today, gain years of maintenance servicing.

The ongoing maintenance and service can be mutually beneficial and profitable to both the bank and the customer.

Equally important, the sales person must align with the customer service person to demonstrate value of the relationship and cross-sell other profitable services.

7. Auditing and evaluation rank essential at all levels.

A major flaw at Wells was a lack of auditing and evaluation of sales results. This includes an initial confirmation email to the customer all the way to a board report summarizing sales results. If these steps were taken, the bank’s senior management would have spotted the situation before it became an epidemic.

Where to go now

Whether service selling or product selling, the following principle holds true:


In the Wells Fargo case, the bank lost direction and only valued itself; stakeholders, investors, management, and employees were misguided by a flawed, product-centric, immediate incentive-based sales program. The losers were over a million deceived—even defrauded—customers who received little or no benefit at a high cost and no value from Wells.

I don’t know that your local car mechanic operates on incentive pay, though the employees often get paid by how much they get done in a day. But from the customer’s perspective, servicing of their family car is a long-term relationship. Whether the work is putting on new tires, conducting safety inspections, installing new brakes or a battery, there is an element of ongoing service.

And the physical objects bolted on, screwed in, etc., aren’t really what’s being sold. Ultimately, the service is keeping you and your passengers safe and enabling your vehicle to get from point A to point B. And that involves a considerable element of trust.

Remember when we used to call such places “service stations”?

And what do banks of all sizes pride themselves on? Service.



Moebs $ervices has a webinar on Sept. 29 on Checking and Service Selling. Learn more here

Mike Moebs

For over 30 years Mike Moebs’ economic research firm has provided data, information, and intelligence to multiple governments, over a 100 news outlets worldwide, and thousands of financial institutions. Prior to Moebs $ervices, Mike worked at several banks as president, COO, and director. His inventions include patents on risk management for loans and overdrafts. In his spare time, he has written 20 books. His uniqueness as an economist with a CPA is from his graduate work at the University of Chicago studying under Milton Friedman. Wall Street, community bankers, and his colleagues know Mike as The Prairie Economist.

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