Good Cross-Selling Gone Bad

Bank of America earned 23% of its revenue from its credit card portfolio in the first nine months of 2009 yet lost $4.5 billion on the product line.



An article in the December 29 issue of The Wall Street Journal (subscription required) highlights Bank of America’s credit card portfolio and cross-selling woes. B of A, the nation’s No. 2 credit card issuer (JP Morgan Chase & Co. is No. 1) earned 23% of its revenue during the first nine months of 2009 from its credit card portfolio. However, because of a 13% default rate, the bank still lost $4.5 billion on the product line.

The problem, according to B of A: “We gave a lot of cards out to our customers.” 

A lot is an understatement.

The article looks at some of the more unsuccessful practices instituted on the front line of the bank's branches. Along with a 2006 purchase of MBNA, B of A instituted a teller score system that automatically alerts tellers of a pre-approved credit card offer for customers at the window. In many instances, the customers already had multiple credit cards. The strategy also fed the aforementioned default rate. In 2010, the bank will encourage frontline staff to focus on the bank’s cross-sell ratio based on the amount of different products customers have instead of the number. Sounds like a novel idea right?

All sarcasm and joking aside, there is a valuable lesson for credit unions: Even though cross-selling similar products to those already held by members may be the easiest sale to make, it isn’t always the correct one. Empower your frontline staff by giving them the tools necessary to identify member needs. Just make sure those needs are aligned with the balance sheet health and goals of the organization. And last but certainly not least, incentivize accordingly.


Jan. 4, 2010



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