Dear Readers,

A friend of mine was once pestered by his bank to the extent of what he described as harassment. He had a premium salary account with the bank and was regularly getting calls from them to accept a ‘free credit card’ for which he was eligible. My friend didn’t want it. After enduring one call per day for weeks and responding politely, he finally asked the bank caller in exasperation why he was being called so often despite clearly stating that he did not want a credit card.

The telemarketer coolly replied, “You are eligible for it. So, you WILL get calls.” That’s when he understood they had been asked to sell by hook or crook. After that, he started receiving two calls a day. He endured the torture for two months before the calls stopped.

The learning from the story is that – for the caller making him buy the credit card was a target. This is how banks hook in customers for more and more – insurance, demat accounts, mutual funds, credit cards – basically a LOT of things we do not want nor need. They help no one but the bank.


The finance minister recently gave a soft warning about banks about cross-selling and mis-selling insurance. We have around 70 insurers, and a lot of it is sold by the bancassurance channel. Now that the government allows them to sell different insurance products, they only have more to sell.

Insurance, unlike most others, is a sold product and not a bought product where awareness is low. It’s the ideal product to be mis-sold to an unsuspecting account holder. After all banks – the big ones – carry much more trust. And that’s how clients become customers for bankers.


Caveat emptor or caveat venditor?

When does this over-selling become a problem? Should the buyers be aware (caveat emptor) or does the modern line of sellers be careful too (caveat venditor)? Let’s pause for a moment and go back to the Wells Fargo story. The home-grown bank that survived the subprime crisis was an American hero until they were exposed. Their retail banking customer story is what banker dreams are made of.

They’d release ratio numbers to indicate the extent of cross-selling to gleeful stockholders and analysts. At its zenith, Wells Fargo's retail bank household cross-sell was 6.16 products per household. Now, which average home would need six banking products?


They sold accounts to immigrants who didn’t understand what they were buying; and deducted account charges from meagre cheques received by cancer patients – a lot of evil went around until whistleblowers made it public.

We are very close to doing the same thing. If a customer needs an insurance product – they might not find the best fit within the products sold by a bank. Sadly, they might not know it. There were cases where octogenarians were sold retirement plans and more such things happened. In India, whistleblowers are rare, regulatory backlash is scarce and the odds of bad things going around are 10x higher than in a country like the US.

It's time to introspect on the power that banks hold over people.

The very, very hard sell

Right after the pandemic, the IT industry had made a hue and a cry when their attrition rate crossed 20%. In banks, it is more than twice that. Almost half of a bank’s staff churns every quarter. It brings me to ask the basic question – aren’t bank jobs considered stable? Also, are bankers surprised or shocked by the level of quitting and have they made peace with it?

No, they are not. Not in the world of sharp-dressed private banking where the pressure on employees is extremely high. They seem to be under as much pressure as regular salespeople. The Wells Fargo story provides an insight here too. The branch employees were asked to sell eight bank accounts per day, as per their accounts. Their managers ensured it happened.

Remember the yelling seen in the video of a private banker that went viral last year? That’s how employees are ‘made to do their job’. Most bankers are under pressure to sell various random products to customers and act as relationship managers, who constantly cold-call select customers with investment plans. As few such pan out, they’re either fired or the salesperson burns out.

Aye Aye to AI

In an increasingly digital world, where little remains real, banks with their brick-and-mortar presence offer some sense of comfort to people. The app that holds your money might one day go away but a bank has a building, people would think. In their love for a quick profit, they’re diluting their trust factor which can open the gates for great big transformations.

AI is one such example. A top banker once said that AI can be employed to give advice to a new user about how to save money, how much to spend, and how to invest taking into account the various patterns observed through a bank account. It’s a wonderful idea. What if a bank says, you can invest this much in an SIP every month and leave so much for emergencies, this insurance plan can cover emergencies, and these can be risky investments. It’s much better than asking your aunt or uncle for ad vice.


But what if we do not trust the institutions that spring AI on us? After all, a bank makes money when we overspend on credit cards, buy insurance plans that make them richer, and MF plans that provide banks with the most commissions. A sensible customer who pays bills on time, and saves money is the worst account a bank can have.

But if an AI employed at a large scale (one per each bank account) can push these scams on a regular basis, and misguide them to ruin? That’s Wells Fargo on steroids. Once let loose, an AI banker might not care to stop for a weeping elderly woman whose money is being charged off by the bank – few humans are hard enough to do that. It’s not the technology that we do not trust, it’s the intent behind it.

A bank’s core business is to offer banking as a service – attract deposits, new clients and provide a safe space. A bank closing down, robbery at a bank or bad loans are always risks. It’s the legit way of cross-selling that’s a real scourge that afflicts almost every account holder. And, it needs to be reined in.

As usual, I am adding here the top 5 stories of the week, trust you will find them meaningful.

1. Bombay High Court dismisses Abhyudaya Bank's superseded board’s petition against RBI
2. Adani bribery case: LIC losses nearly Rs 9000 crore; PSBs witness fall
3. Banks slow down retail loans, focus on expanding corporate loan books
4. PSBs disburse over INR 13 Trillion to MSMEs in Q2 FY25; SBI leads in credit share
5. Deepfake videos impersonating bosses from finance world on rise; How to keep yourselves safe?
   

Happy Reading.
Amol Dethe,
Editor,
ETBFSI.

(Editor's note is a column written by Amol Dethe, Editor, ETBFSI. Click here to read more of his articles exploring several buzzing topics)

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