In a recent Wall Street Journal article, Bank of America openly discussed the fact they gave out far too many credit cards and now something is going to have to be done about it to reduce continued risk to the bank. Expect to see more Bank of America credit cards closed unilaterally.
But in the same article Bank of America talked about how bank branches sell credit products to its customers.
The old method went like this.
But in its pursuit of market share, Bank of America made poor underwriting decisions and the banking crisis of the last two years exposed many of those flaws. While trying to become the nation’s No. 1 small-business lender it offered unsecured credit lines of up to $100,000 to start-ups, some in business for only one day. Bank of America’s small-business default rate hit 17.5% in the third quarter of 2009.
BofA courted more risk in credit cards by pairing its purchase of MBNA with a customer tracking system known as “Teller Score.” A bank teller would receive a prompt to offer a pre-approved credit card to the customer standing at the window. Weekly acceptance reports were broken down by region, market, branch and individual levels. The bank’s executives would discuss the credit-card approvals on weekly conference calls.
It was a “product-pushing approach,” said one person familiar with the process.
The new Bank of America approach is still going to be to have bank branch employees try to up sell you on another product, but this time with a bit more restraint.
Starting Jan. 1, a spokeswoman said, branch employees and their managers will have some of their pay tied to how many different products they can sell to existing customers, rather than, for example, selling multiple credit cards to the same customers as they did in the past. A more important metric, she said, will be the branch’s “cross-sell ratio,” or how many different products are owned by each household.
The Teller Score system isn’t going away, the spokeswoman said, but it will be applied differently. If the customer is interested in a card, the teller won’t close the deal. Instead, the customer will step out of line and seek out a “personal banker” elsewhere in the branch for a more in-depth conversation.