Uh Oh: Bad Customer Service Is Good For Banks

  • Share
  • Read Later
Justin Sullivan / Getty Images

A customer enters a Wells Fargo Bank branch office on July 12, 2012 in Daly City, California.

Dick Bove is mad as hell, and he’s not going to take it anymore. The banking analyst with Rochdale Securities used his most recent research note on Wells Fargo as a soapbox to blast the bank for its lousy customer service. He details a litany of weird fees, bureaucratic bungles and tone-deaf associates — familiar gripes for many big-bank customers. But then he says something as unexpected as it is disheartening. Bad service isn’t hurting Wells Fargo’s stock performance; in fact, it might even help. What’s good for investors, it seems, is bad for customers.

“For the last 40 years I believed the quality of the product was the key determinant to the success of the company,” he says. In banking, the “product” — ie. money — is a commodity, so the determining factor is the delivery method or service. So how is it that Wells Fargo, which Bove characterizes as “one of, if not the best-run bank in the United States” can thrive in spite of customer service?

“There’s no evidence in the US banking system that offering a labor-intensive personalized service is successful in terms of letting the banking instituons survive. It’s very costly w virtually no benefit,” he says.

(MORE: Bank of America Closed a Bunch of ATMs This Year)

This is a depressing realization for customers, but there’s one additional angle to consider: Maybe the definition of “good customer service” has shifted. Four decades ago, banks didn’t have to pour resources into online banking, mobile apps, remote check deposit and a host of other technological advantages that a growing number of people are using, if not expecting from their bank.

The quote-unquote delivery system is no longer an employee standing at the door to a branch, greeting customers. It’s a computer. Banks today are focusing more on giving customers fast, automated self-service they can get to anywhere and at any time while excellent face-to-face service dies on the vine.

So what prompted the shift? Well, there’s the pace of change and all that, but there’s something else, too: These electronic ties do a great job of tying you to the bank.

A new survey from Consumers Union finds that poor customer service is among the top three reasons people want to switch banks (fee increases are number one). But although roughly one in five people say they want to move to a different bank, more than half don’t bother.

A study released in May by Consumers Union explored why this is the case. “Some bank policies are designed to make it challenging for customers to walk away,” Consumers Union staff attorney Suzanne Martindale said in a statement. The group analyzed policies for closing accounts at the largest U.S. banks.

(MORE: How the Gun Won)

Among the deterrents it turned up: fees to close accounts or to transfer funds into a new account, requiring closures to take place in person, and the fact that it’s incredibly difficult to track down the details of these policies. Researchers even got conflicting reports from different employees at the same bank.

Take Bove, for example. Although he shifted the bulk of his personal banking to JP Morgan Chase & Co. after getting fed up with Wells Fargo, he still has one account at that bank that he’s not closing because he has automatic deposits and debits set up. “It’s not easy to change a bank in today’s environment,” he said. “If you hook yourself up to a bank electronically, if you now decide to move to another bank, it becomes a real hassle.”

Alan Yungclas
Alan Yungclas

Live in a small town and use the locally owned bank or credit union.  You will have friendly knowledgeable  people and online services too.

Darrel K.Ratliff
Darrel K.Ratliff

Bad customer service is good for Small Banks since they care about customers  and provide better service at lower rates  but  is bad for big banks  since it drives customers to Credit Unions with less charges  for the same  product with better service to the public and the profits are returned to the owners   the Union members and not some investors that could care less about service to the customer only the return on investment and their bottom line profits..


After being screwed constantly by US Bank, I switched to a local credit union and have had no problems since.


Since when has the 1% ever offered good customer service?  Corporations' number one priority is to their stockholders not their customers.  Customers are expendable, investors are not.  I wonder which group gives them more money?


This is because American people are not really citizens anymore, they're consumers.

You can torment consumers because you know they'll never give up consumption of their favorite goody that they were started on as a small child.


People, you really don't need a brick-and-mortar bank. I have been with E-Trade for about 12 years. Their customer service is outstanding, they have all the services you want, and their fees are low.

Firozali A.Mulla
Firozali A.Mulla

If it

is not the economy it is my land, why are you grabbing this? Japan's defence minister on Friday

warned Tokyo could send troops to a chain of East China Sea islands at the centre of a territorial row

with China if the simmering dispute escalated. Satoshi

Morimoto said

Tokyo's position had not changed, but confirmed that it would use force to

defend the islands known as Senkaku in Japanese and Diaoyu in Chinese. "Senkaku

or not, defence of islands is principally conducted by the coastguard and

police," Morimoto told reporters in Tokyo. "However, the law

stipulates that Self-Defense

Forces troops can

act" if local authorities are unable to handle the situation. His comments

came a day after Prime Minister Yoshihiko

Nodatold parliament he would take "stern actions" against

any "illegal actions" on Japanese

territory"If illegal actions are made by neighbouring

countries in our territorial soil and waters, including Senkaku, we will take

stern actions including using of Self-Defense Force troops, if necessary,"

Noda said Thursday. "(But) it is important that we adopt a solid

crisis-management framework and make diplomatic efforts to prevent situations

from developing to such an extent," he added. Chief

Cabinet Secretary Osamu Fujimura, the government's top spokesman,

played down Noda's remarks on Friday, saying he had just responded to a

hypothetical question about a Chinese military attack. "Prime

Minister Noda was

referring to a theoretical possibility and referred to the use of Self-Defense

Forces troops," Fujimura said, adding that the remark was not specifically

directed at China. Tensions between the two countries rose earlier this month

after Chinese vessels twice entered waters near the resource-rich islands,

which are claimed by Beijing and Tokyo. Japan lodged two formal complaints with

Beijing last week and summoned the Chinese ambassador to Japan in protest. The

uninhabited outcrops were the scene of a particularly nasty spat in late 2010

when Japan arrested a Chinese trawlerman who had rammed two of its coastguard

vessels. Tensions spiked in April after controversial Tokyo governor Shintaro

Ishihara, an outspoken critic of Beijing, called for Tokyo to buy the islands

from their Japanese owner. Japan's premier has said the central government was

also considering buying the island chain, sparking an angry response from Beijing.

Only reminds me of the Falkland and the Bangladesh in the time of Bhutto. In other

words we will not have for a long time. Add to this all claim to be right to

have their land back no matter who gets thrashed in the way  I thank you Firozali A.Mulla DBA


Gary B
Gary B

All technology aims at making life easier, more convenient, and cheaper--in more ways than one. It's getting so we don't need "us."


Maybe its my youth talking, but customer service just isn't that important. I do all my banking on my phone, all my bill paying is online. Even my paycheck is deposited for me on schedule.

The only issue I've ever had is fraud, which has happened once and they fixed it all with less than twenty minutes on the phone.

I'd really rather just have more ATMs.

Firozali A.Mulla
Firozali A.Mulla

If you

keep $100,000 of your portfolio out of the market, you could be costing

yourself almost $200 per day. Now

that I have your attention, if you're like every other investor -- and I do

mean "every," with myself included -- a question that you continually

grapple with is whether you should have your money invested or if you should

wait around for a time when the stock market

and global economy look more inviting. With the

2008/2009 recession flashing

brightly in the rear-view, it's completely natural to wonder whether now is the

right time to invest or

whether you'll just be stepping in front of an oncoming freight train. The

problem with that question, though, is that it's terribly short-sighted. When

we ask ourselves

the question of whether or not we should be investing right now, we should be

asking ourselves simultaneously if we have the foresight to know how markets

will move over the short term -- months, weeks, or even days. If we don't, then

when we decide to invest on a particular day or not invest on a particular day,

we're essentially doing it at random. I hate to be the one to break it to you,

but most research points toward exactly that conclusion. When investors try to

time the market, they tend to lose. At the risk of oversimplifying some of my favourite

research on the topic -- Brad Barber and Terrance Odean's "Trading is Hazardous to Your Wealth" -- the two

researchers sifted through reams of data and found that those retail investors

that trade most get below-average results. The timing of their trading ends up

just being random and not actually adding any meaningful benefit, while

transaction and other costs eat away at their returns. I thank you Firozali

A.Mulla DBA





Firozali A.Mulla
Firozali A.Mulla

Another black Friday if you ask me. New figures released on

Friday by the White House predict this year's federal budget deficit will end

up at $1.2 trillion. That

would make the fourth consecutive year of trillion dollar-plus deficits during

President Barack Obama's administration. The

bleak figures, while expected, are sure to add fuel to the already heated

presidential campaign, in which Obama's handling of the economy and the budget

are a main topic. Friday's release came as the government announced that US

economic growth slowed to an annual rate of just 1.5 per cent in the second

quarter of this year, as consumers cut back sharply on spending. The

White House budget office also predicts for this year that the economy will

grow at a modest 2.6 per cent annual rate and that the jobless rate will

average 8 per cent. "The

economic recovery that began in 2009 will continue at a moderate rate and

unemployment will gradually decline," Jeffrey Zients, the acting White

House budget director said in a blog post. "The economy still The 2012

budget year ends on Sept. 30. The White House also predicted that next year's

deficit will fall just short of $1 trillion, higher than it predicted in its

February budget release. The predicted deficit for 2012 actually improved by

$116 billion, but much of that was because Congress didn't enact much of

Obama's jobs plan. faces

significant headwinds," he added. But

the White House promises deficits will drop to about 3 per cent of the size of

the economy by 2017, in part through $1.5 trillion in tax increases over the

coming decade. The White

House report - released Friday afternoon with the Olympics poised to distract

voters for two weeks - again trumpets Obama's longstanding approach to tackling

the deficit. It includes tax increases on families earning above $250,000,

already-enacted "caps" on agency operating budgets and modest savings

from federal benefit programs like Medicare and Medicaid. "Since taking office, the

president has worked to restore fiscal responsibility," says the OMB

report. Under Obama's

budget plan, the total US debt would reach $16.2 trillion by the end of the

year and soar to $25.4 trillion at the end of a decade's time. The government is likely to

reach its borrowing cap - the subject of a fierce fight last summer between

Obama and Republicans - late this year or early next year, which is going to

require the next Congress and either Romney or Obama to act together to

increase the borrowing cap. That is seen by many as an opportunity to force

lawmakers to finally tackle the country's major budget problems. Romney, for his part, offers

relatively few specifics on the budget but promises to bring total government

spending down to 20 per cent of the US economy by the end of a first term in

2016. That is roughly in line with where it was during Republican George W.

Bush's presidency. Government spending now equals 24 per cent of gross domestic

product. Most of the products we buy – everything from toilet paper and

peanut butter to DVDs and board games – are purchased with the idea that we’re

going to use them some number of times. Take a jar of peanut butter. When we

have a jar on hand, we’ll get it out of the cupboard, remove a bit for a

sandwich or something else, then put it back. Over the course of that jar,

we’ll get some number of uses out of it. The same is true for the toilet paper.

Each time we use that roll, we deplete it of a few sheets. Over the course of a

roll, we’ll get some number of uses out of it. With other items, such as a

knife, I hope to get a very large number of uses out of it. In each case, a big

part of the decision to purchase the item comes from the idea of “cost per

use.” In other words, how much do I have to pay for each use I’m going to get

out of that item (before it spoils or breaks)? I thank you Firozali A.Mulla DBA


All I can say is that I switched to USAA and have never been happier with my bank! 

You just need to make that liiittle bit of effort to move to a place that treats you better.  If you are too lazy to actually end an abusive relationship with a bank, well, that's all on you.  So don't expect others to feel bad for you.


If any company let alone a bank starts to think, on the basis of these findings, that they can relax their attention to customer service, they are mistaken. Ultimately, if customers are not treated properly, they will leave, and no company, big or small, has any hope of a long future if they cut corners on customer service. 

This should definitely not be construed as a message to businesses that their customer service efforts are in vain.


It's a real blow to advocates of customer service who believe that taking care of customers is a universal obligation of anyone who calls themselves a business. Like it's almost a moral issue. Customers need to be treated right whether or not it's good for business, otherwise a company has no right to trade.


This is spot on. As a management consultant, I helped set hold times for a Telco. When we modelled the cost of building and staffing a call center against the cost of customers churn due to long hold times, the mathematically correct solution was to put a single phone in an empty room at set hold times at forever. Forgive me, I’m repenting.

For a terrifying read on vendor lock-in strategies, check out:




This statement isn't true for all: "The quote-unquote delivery system is no longer an employee standing at the door to a branch, greeting customers." Chase Bank still has people standing by the door greeting you when you come in and leave, at least at the banks I go to.

Derek Henderson
Derek Henderson

I use Wells Fargo as well. No complaints, but I've never had to talk to them. In the 6 years I have been with them, I have made absolute sure that I never pay them a dime for anything. One thing I think is funny with modern banks in general tho, is how SLOW they are. Back when I fist started banking, I could take my savings book and pull money out of one bank and go to another bank and it would show where I pulled money out, just like that. Now it takes DAYS for transactions to post, then actually leave you bank. Sometimes they disappear altogether and come back later. I asked a bank associate about this and they said when you make a transaction and the vendor requests the funds, the bank sends an acknowledgment and if the vendor doesn't acknowledge that acknowledgment, they see it as a glitch or something and don't take the funds out. Then when the vendor comes back later and says "yes we want our dang money, idiots!" then the transaction pops up again. Very shady and VERY SLOW!


I have or oversee 6+ Wells Fargo accounts for about the past 10 years  including checking and savings for personal, business, and I'm the assistant treasurer in my church.  Here are some of my opinions and experiences:

1) For personal accounts they are fairly OK. Just be careful with the balances and don't overdraw.  Their overdraft fees are very high, but they usually waive them if you ask - sometimes you get better results going into the branch, other times it's better to call.

2) Bankers, and even tellers sometimes, are too often hitting on me to open a new account - not sure why.  Perhaps they get a commission.  Anyway, it's pretty aggressive.  We did it once for a church account.  Before I did it, I made them promise, multiple times, that there would be no fees/charges/costs/minimum balance/etc. because our then-current account had no fees, minimum balance, etc.  Multiple times they promised "no fees - it would be the same as the old account."  So we opened the new account, and right from the beginning were getting whacked with many fees and charges.  They agreed to waive some, but not all.  And some of the ones they waived, the waiver was just temporary; and resolving all of this took much time (customer's time is not valued by Wells Fargo).  Fortunately we kept the old account open, so we went back to using it, and don't get those fees any more.  Summary - Wells Fargo does not have the customers' highest benefit in mind.

3) Fees have gone up for wire transfers - inbound and outbound.

4) To do an outbound, out of country wire transfer, you have to go into the branch, and wait for an available banker.  Unfortunately, this cannot be done after 4 PM Easter Time, which in California is 1 PM.  Unfortunately, the bankers don't always know this.  So you can wait for a banker, get one, spend 20 minutes watching him/her fill out the form, and then have them tell you that you have to return the next day, before 1 PM California time, and repeat the process.  Also, they do not send wires to all countries.  Ask before you spend the time filling out the form.

5) Overall, Wells Fargo does not value their customer's time.  Whenever there are errors, problems, etc. Wells Fargo happily tells you, "Oh, we'll make it right!"  What they don't make right is the customer's 30+ minutes on the phone to "make it right".

6) There are lot of WF branches, so that can be convenient if you need to go to a branch.

7) One of the greatest benefits of Wells Fargo, is that they taught me humility.  I am a pretty successful businessman and was a bit arrogant, especially when it came to money and business.  I felt that I had a high net worth and deserved special treatment, especially from banks and other financial institutions.  But on one of those occasions when they were denying my requests and generally treating me like crap (but with a smile), I had an epiphany:  I am not special, I am not  royalty - I am just a regular guy that deserves poor service.  After that I had much lower, and more realistic, expectations.  At this point, I'm just grateful that they credit my deposits properly, and give me my money when I ask for it.  And now I am much happier in my new-found humility.  Thank you Wells Fargo.


I don't know about what he uses Wells Fargo for, but as an average customer, they have been by far my best bank in terms of customer service.