As part of a cost-cutting push, the bank has asked IT vendors to refund part of what it paid them in 2018 – and at least seven have bowed to the pressure
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Wells Fargo has convinced at least seven technology vendors to issue partial refunds for their services, according to a Reuters report.
In July, Wells Fargo asked about 14 of its IT vendors to return 2.5% of what they’d earned from the bank in 2018. The request for “voluntary rebates” was a part of the bank’s ongoing cost-cutting efforts. Outside vendors should send the bank money, it said, because they’d benefitted from increased business as a result of its never-ending parade of scandals and regulatory woes. Citing sources familiar with the matter, Reuters reported Tuesday that at least seven of those vendors have agreed to issue the “rebates.”
While Wells Fargo spokesman Peter Gilchrist told Reuters that participation was voluntary and would not be considered when awarding future contracts, many vendors reportedly felt compelled to return their fees out of fear that failure to do so might hurt their chances of future business from the banking giant.
Many vendors felt that refusing to voluntarily issue the refunds would make them less competitive as Wells Fargo reduces its use of outside contractors, Reuters reported. Wells Fargo CFO John Shrewsberry recently said that investors could expect the bank to reduce its spend on outside vendors in the next quarter.
In 2018, Wells Fargo spent $660 million on outside IT vendors, according to Reuters. IF the bank were to recoup $2.5% of that, it would only bring in around $16.5 million, while its annual budget is $56 billion. But for smaller IT firms, giving a 2.5% refund to a client as large as Wells Fargo could seriously impact earnings, Reuters reported.
At least two vendors have refused to pay the refund as a matter of principle, Reuters reported.
“They’re just expecting to unfortunately have the relationship end,” a person familiar with the matter told the news organization.
