Bowen, 54, spoke to Finance and Insurance Editor Hannah Lutz and Staff Reporter Jackie Charniga in November about transforming the business and rebuilding public trust. Here are edited excerpts.
Q: How is Wells Fargo looking to improve relationships with its dealer partners and their customers?
A: We have seen very clearly that automotive is evolving at a fairly rapid pace, and we have to evolve with it. That's one of the primary reasons that we started this transformation work about 15 to 18 months ago. As I think about goals and objectives for 2019, are we hitting the marks on making ourselves faster in response time to our dealer customers? Are we making ourselves more efficient in the way that we respond to our dealers? Are we making ourselves easier to transact with from a dealer standpoint? Once that consumer becomes a customer, are we making that a good customer experience for them?
Wells Fargo began dialing back on auto originations in 2016. What's its strategy on originations now?
That was intentional. As we knew we were going to transform this business, we also knew that in going through that transition process, it was going to be important for us to get those transformational activities right and position ourselves so that we could be able to support not only the marketplace but our dealer customers and consumers more effectively going forward. As a trade-off for that, we did expect that there would be a drop off in some of the production.
We've gone through that cycle now and feel that we are positioned to better serve customers as we move forward, both dealer customers and consumers. And, if we care for them properly, then I expect we'll get growth out of it.
In 2018, Wells Fargo came in below average on J.D. Power's consumer and dealer satisfaction studies. What do you attribute that to, and how will you work to improve scores on both sides?
We spent a fair amount of time with the J.D. Power team to go through and do a diagnostic on our results and what we should take away from that. We want to make sure those survey questions are getting to the right person at the dealership who is making those decisions.
That aside, we take the results from the J.D. Power survey very seriously. We certainly would love to continue to see ourselves moving up in those results, but we're going to take that as a gift from the marketplace and say, "Here are the things that the market is telling us that we need to continue to focus and improve on," and that's what we're doing.
How has Wells Fargo expanded digital efforts in the auto practice?
If you turn the clock back 18 to 24 months ago, we did not have a dedicated effort on the digital and the app component for this segment of the business. We have been investing in technology as part of our transformation. We realize that we have a gap here, and we have to be out here in a digital way to interact with both our dealer customers, but also consumers.
We see a lot of inbound traffic through our bank site where people are looking for car loans. We got the signal that we have to make sure we are in that digital lane. You should expect to see from us a digital offering out in the marketplace designed to help align consumers who have automotive financing needs with solutions within Wells Fargo, and I would expect a lot of those solutions are going to be in conjunction or working with our dealer network.
Industrywide, what are the major auto finance trends you're seeing?
What we're watching and keeping an eye on is the affordability of new vehicles. Today, the average transaction price is a little over $35,000. As the price of vehicles has increased at a pace that's faster than the average household discretionary income, in some cases that's making the affordability of new vehicles a little bit of a stretch. When you factor in interest rate increases, it just further stretches that affordability.
That's why used-vehicle values are holding on pretty strong right now. There was an industry view going back a year or so ago that all of these off-lease vehicles that were supposed to hit the marketplace were going to push used-vehicle prices down, and we just haven't seen that play out.
Overall, the market's still healthy; it's still a very competitive marketplace. There's still a lot of lenders in this marketplace, and I don't expect that to change in 2019.
Besides customers switching to used vehicles, are there other strategies, such as lengthening loan terms, on your radar for easing the affordability burden?
We have seen other lenders out in the marketplace going 84 months; we've even seen some stretching out to 96 months. The dealers want to sell consumers vehicles, so if they're not going to see them for a couple more years longer than originally they were going to, the dealers don't think that's a good thing. The bigger issue for the dealers and the lenders is if you expand those terms out, you're increasing the likelihood that that consumer could be upside down on their vehicle when they do decide to either trade it in or buy a new vehicle. In some cases, a long loan term is needed to make the payment work for the consumer, but I don't know that we'll see that become mainstream. I don't see a lot of lenders in the marketplace looking to extend terms to solve the affordability issue. We are not looking at aggressively extending or expanding our terms.
