Bank of America continues to shift from physical to digital
Since 2009, Bank of America (BofA) has closed 1,597 branches in 253 counties across the US, selling the spaces to local banks in some areas and directing customers to further branches in others, according to The Wall Street Journal.
For context, that’s equivalent to 26% of the branches that the bank currently operates, and represents a big cut that’s reflective of a rising industry trend.
For banks, closing branches is a monetary game. Physical banking is expensive — and so cutting branches, especially in less profitable areas, could help banks save money. As an example, most of BofA’s branch closures have been in rural areas, which see $1.4 million in annual revenue, compared with $2.5 million at an urban branch. Closing branches and enhancing digital offerings enables banks to cut operating costs as mobile deposits "cost one-tenth of what it costs to do over the counter," according to Bank of America CEO Brian Moynihan, who was quoted by Yahoo. Saving that money frees up funds for banks to invest more in digital and mobile offerings as they become more popular.
Bank of America is emphasizing its digital offerings to fit consumer needs.
- The popularity of digital banking has decreased the need for human support and physical branches. Customers are increasingly dependent on mobile banking, and less on human support. In 2016, 53% of all US adult smartphone owners used mobile banking — a figure that’s likely increased in the interim. And investing in these consumers is smart, since they tend to consume more banking services on average and post lower overall attrition rates. Using saved funds from the physical channel could be allowing BofA to do just that.
- Bank of America is boosting offerings that are already popular. The bank counts nearly 30 million digital banking customers, 23 million of which are active mobile banking users. Among those customers, BofA notes strong and rising peer-to-peer (P2P) and mobile bill pay engagement. Keeping these customers engaged, through offerings like the firm’s pilot hybrid branch, which brings digital banking features to an in-person location, as well as new digital offerings like cardless ATMs, an enhanced mobile dashboard, and a goal-setting tool, could help the bank continue to grow in more cost-effective and popular ways.
Digital disruption is rocking the payments industry. But merchants, consumers, and the companies that help move money between them are all feeling its effects differently.
For banks, card networks, and processors, the digital revolution is bringing new opportunities — and new challenges. With new ways to pay emerging, incumbent firms can take advantage of solid brand recognition and large customer bases to woo new customers and keep those they already have.
And for consumers, the digital revolution is providing more choice and making their lives easier. Digital wallets are simplifying purchases, allowing users to pay online with only a username and password and in-store with just a swipe of their thumb.
Dan Van Dyke, senior research analyst for BI Intelligence, Business Insider’s premium research service has written a detailed report that explores the digital payments ecosystem today, its growth drivers, and where the industry is headed. The report also:
- Traces the path of an in-store card payment from processing to settlement across the key stakeholders.
- Forecasts growth and defines drivers for key digital payment types through 2021.
- Highlights five trends that are changing payments, looking at how disparate factors, such as surprise elections and fraud surges, are sparking change across the ecosystem.
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