(AP Photo/Rogelio V. Solis)The ripples continue from the 2016 Wells Fargo scandal, in which some bank employees signed up thousands of unsuspecting consumers for credit and bank accounts without their knowledge. After drops in Well Fargo’s banking business, Wells Fargo’s credit card applications have fallen, year by year, by 42% during the first few months of 2017. Many analysts speculate the downturn in new card customers further reflects the harsh court of public opinion in the wake of the scandal.While this is likely true, one shouldn’t ignore another weak link in Wells Fargo’s credit-card business – the bank’s relatively anemic rewards and incentives. As competitors have been ratcheting these up in recent years, the venerable bank has stayed to a conservative course. With the scandal now compounding the uncompetitiveness of its cards, Wells Fargo may soon be forced to start offering consumers more alluring perks, points, and other card incentives in order to win back business.
The Continuing Card Wars
The credit-card industry has been a buyers’ market in the past few years. Most top U.S. credit card issuers are investing heavily in incentive programs despite the short-term hit to their bottom line. For all the cost of the programs, they do attract news business, even if the loyalty and profitability of the newcomers may be in question.
They also provide a little pizzazz, even for banks and other issuers who aren’t known for that. Often, that excitement comes in the form of a premium credit card with an especially splashy package of benefits and bonuses. A case in point is the recent entry of U.S. Bank into the luxury-card market. Up until now, this bank hasn’t been a big player in the card-rewards wars, and certainly not in luxury cards. However, U.S. Bank just launched its own $400 annual fee credit card, with a packages of rewards and bonuses that is set to compete with titans like the Chase Sapphire Reserve and the Amex Platinum.
Excitement and Wells Fargo have rarely co-existed over the bank’s hundred-plus year history. Wells Fargo offerings tend to rank in the middle of the pack in the roundups of best credit cards I create for ValuePenguin, and are consistently bested by cards from AmEx, Chase, Citi, and others. Among the bank’s 10 distinct credit cards, only three have offers that stand out – the Propel, Propel 365, and the Cash Wise Visa. All other cards are fairly limited.
These aren’t cards that are a must-have for a high spender or a frequent traveler, who seeks premium benefits, like airport lounges. While not particularly bad, Wells Fargo’s credit card business is simply dull, and its slide in new customers reflects that fact.
In light of that, recent reports suggesting the bank is testing the waters for new products comes as little surprise. The L.A. Times reported that the bank has begun surveying their customers about their Wells Fargo credit card products. People were asked to say, on a scale from 1 to 10, how they feel about statements like:
- I get a feeling of happiness when I use Wells Fargo credit card
- Wells Fargo credit card gives me a real thrill
- Wells Fargo credit card adds joy and pleasure into my life
- Wells Fargo credit card is clearly best in the business
The response, at least among many online communities, has been almost universal: Wells Fargo credit cards aren’t nearly as tantalizing as their competitors. When we asked the company about their plans, their response, while hardly explicit, seemed almost to acknowledge there’s work to be done. It said that Wells Fargo’s goal is to offer “[their] customers’ card of choice,” and that the bank plans to “continue to refine and improve [their] card portfolio and reward offerings to give customers compelling reasons to carry and use [their] cards.”
Sometimes a crisis is what a company needs to jolt itself out of the doldrums . If Wells Fargo actually acts to goose up its current cards and launch new ones, its own fortunes–and consumers who have soured on the company because of last year’s crisis may actually find reason to consider signing on for one of their cards.