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Wells Fargo Online Financial Services A Case Solution
| Solution Id | Length | Case Author | Case Publisher |
|---|---|---|---|
| 1153 | 1088 Words (5 Pages) | Robert S. Kaplan, Nicole Tempest | Harvard Business School : 198146 |
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Being a pioneer of online banking services in the United States, Wells Fargo has the first-mover advantage over the competition. Internet banking and online services, though initially employed as R&D, have gained customer attention much faster than expected. On one hand, it is a convenience for the customers to be able to manage their bank accounts from their personal computers; on the other, online banking is also a tool for the bank to reduce its operating costs. At Wells Fargo, although it was believed that online services cost less than conventional banking such as branch banking, telephone banking, and banking through ATMs, Online Financial Services (OFS) was viewed as a cost center. The costs incurred, as well as the revenue earned, for different services offered to the customers online, were charged to different departments of the bank. Under these circumstances, the Online Financial Services (OFS) was expected to achieve breakeven by 2001. However, in September 1997, the OFA team at Wells Fargo decided to implement Balanced Scorecard in order to measure and track the performance of OFS and be able to unfold its true potential as a cost-saving unit for the bank.
Following questions are answered in this case study solution
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Develop the objectives, linkage map, and measures for the two strategic themes:
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Increase revenue per customer
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Decrease cost per custom
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Linkage Map
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Build / Construct a Balanced Scorecard
Case Analysis for Wells Fargo Online Financial Services A
1. Develop the objectives, linkage map, and measures for the two strategic themes:
For the implementation of Balanced Scorecard, the bank devised a cross-sectional team consisting of top and middle managers from OFS and various other departments. The strategic themes developed and agreed on by the team include: 1) add and retain high-value and high-potential customers, 2) increase revenue per customer and 3) reduce the cost per customer. The objectives, linkage map, and measures for the first theme are presented in the case study while these for the other two themes are developed as follows:
Increase revenue per customer
As mentioned above, the OFS group charged the costs related to consumer banking products and services, availed by the customers online, to the relevant department inside the bank. Similarly, the revenue generated from customer banking activities was credited to the relevant product area of Wells Fargo. Hence, the only direct sources of revenue for Online Financial Services are as follows:
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The fee charged for bill paying services
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Access fee from Money and Quicken users
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Bounty fee received from third party alliances
Under the theme of increasing revenue per customer, it is important to consider revenue from both perspectives i.e. the Wells Fargo perspective and the Online Financial Services perspective. Firstly, the main source of revenue for the bank is the spread; the difference between the interest rate earned on loans outstanding and the interest rate paid to depositors. Hence, the revenue will grow for the bank if balances increase. Secondly, of the sources mentioned above, the largest source of revenue for OFS is the fee charged to other areas within the bank. Since the fee is proportional to customer usage, an increase in the number of transactions per customer will lead to an increase in the revenue per customer.
Moreover, customer retention is less expensive as compared to customer acquisition. By cross-selling various products to high-value potential customers, the bank can increase its revenue per customer.
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