Wells Fargo is an unusual bank. In the first place, it is headquartered in San Francisco, not in a typical financial center like New York. It is also unusually socially conscious, earning high marks for its environmental record and setting records for financing green projects.
Still, despite its offbeat culture, it has been enormously successful. With enviable operating margins of over 40% and a $260 billion market cap, it is the world’s most valuable bank. Since the financial crisis, it has had 16 consecutive quarters of profitability.
To get an idea of how Wells Fargo operates, I spoke to Steve Ellis, who runs its wholesale services group. Surprisingly, the story he told me had little to do with complex financial derivatives or risky trading strategies, but how it learned to innovate around the customer. Clearly, his experience applies not only to banks, but to any business.
A New Model For Banking
It used to be said that commercial bankers operated on the “3-5-3” model. They would borrow at 3%, lend at 5% and be on the golf course by 3:00. In other words, banking was considered to be a relatively dull business for rather dull people. That all changed for Steve Ellis when he attended a payments conference in April of 1999.
As he expected, it was a fairly sleepy conference, with the usual lineup of dry financial executives. But then Scott McNealy of Sun Microsystems got up to speak and described a completely new era of digital banking that would unfold over the next decade. Nobody else seemed impressed, but Ellis was transfixed. For him, it was an epiphany.
He says, “I saw a chance to use the internet to create new value that didn’t exist in the paper-based world. We could build a banking business around customers, not products. That means that clients could spend less time dealing with banking and more time running their businesses. If a money transfer takes a minute instead of an hour, that’s real value.”
He realized that as banks adopted technology they would need to change the way they ran their business. Instead of operating on “bankers hours,” services would have to be built around the customer, rather than internal banking processes.
Building A Customer Experience Process
Ellis realized that technology could be used to make the customer’s life easier, streamlining processes to enhance user experience, but he also knew how “customer is king” initiatives could easily devolve into useless platitudes. He wouldn’t find answers in boardroom discussions, but would need to look beyond banking for insights.
So Ellis immersed himself in Internet culture and eventually hit on ethnography techniques, which had been commonly used in consumer products companies like Procter & Gamble, but were completely foreign to the banking industry. At first intrigued, then excited, he sent his team for training at Stanford university to learn how to perform ethnography studies.
It seemed to be exactly the answer he was looking for. Instead of having executives brainstorm in the corporate offices, they would get out and observe customers as they navigated often confusing banking routines. As they uncovered problems and experienced frustrations first-hand, Ellis and his team could devise solutions.
Today, Wells Fargo executives go into customers’ offices 30 times a year and watch them bank. Ellis has also created customer councils to advise where the pain points are and how service can be improved. To a large degree, Ellis has shifted the focus of corporate banking at Wells Fargo from merely devising financial solutions to product design.
Getting Elephants To Dance
Yet even with the new focus on the customer, Ellis realized that if his group kept the same stodgy culture that the banking industry had become known for, he wouldn’t be able to keep up with the pace of digital innovation. It wasn’t just technological challenges he was facing, he also needed to rewire the software of his organization.
Today, Wells Fargo is a well oiled innovation machine. Every six months, Ellis’s team uses the ethnography studies, customer councils and insights gleaned from internal metrics to identify ten priorities. Then they get to work, developing, testing and deploying new services every 90 days. They’ve maintained that clip for fourteen years.
However, it is not just internal processes that have changed, but the culture as well. Ellis’s bankers don’t sit in cozy offices, quietly examining financial statements (nor does Ellis himself), but work in open cubicles designed to promote collaboration. They are constantly iterating, experimenting and testing.
Perhaps most importantly, they are not limited by a long range plan. There is no “five year death march” toward a transformation that will never happen—or be outdated by the time it does. Instead, their purpose is to improve their customers’ businesses and adapt quickly to shifts in technology and the marketplace.
A lot has changed since Steve Ellis attended that payments conference which changed the course of his career and Wells Fargo’s business. In 1999, the bank was doing zero transactions online. Today, Ellis’s commercial banking unit processes $11trillion dollars per year on the Internet. Still, he believes that the biggest changes are still to come.
The immediate challenge is to create a more responsive banking environment. Banking services need to not only function across platforms, but provide a consistent experience across a variety of devices and interfaces. Someone who is used to banking on a desktop should be able to switch to a mobile phone without skipping a beat.
He sees even more potential in using emerging technology to improve security interfaces. Today, we have to juggle a number of logins and passwords, but in the future Ellis says that a voice will be enough. If a credit card transaction looks suspicious, rather than blocking our card, the bank will be able to simply confirm our identity biometrically on our device.
Cognitive computing services like IBM’s Watson will also play an important role in the future of banking. This technology can delve through mountains of data to learn our financial patterns and recommend products to suit them. It may also play a part in designing products for customers who are now poorly served.
All of this is likely to take place in the next few years and who knows what will be coming after that. One thing is for sure, banking is no longer a stodgy old business, where executives can afford to be on the golf course by 3:00.