Bank of America bets digital transformation can offset rising expenses elsewhere
Bank of America is investing in its technical capabilities and hoping a bit of digital momentum can offset lower interest income amid higher expenses.
The bank said that it ended its first quarter with 27.1 million active mobile banking users, up 9 percent from a year ago, and digital sales were 27 percent of all consumer banking revenue.
In addition, Bank of America said it had 5.4 million Zelle users, up 2.7 times from launch in June 2017. Zelle is a competitor to PayPal's Venmo. Bank of America also recently launched Erica, an artificial intelligence platform that has 6.3 million users.
Brian Moynihan, CEO of Bank America, said on an earnings conference call that digital is critical to the company's future. He said:
We continue to serve our customers in every manner possible. They can have digital, physical, 24 hours a day cash, electronic payments, checks, wires and ACH, a loan officer and online applications to apply for a mortgage. It is their choice. There are 37 million digital users now with 27 million of those mobile. And we now have a 27% of our sales transacted digitally. 77% of our deposit transactions are now down through digital means. This means more of our financial centers and time can be devoted to important events in the client financial lives.
However, financial chief Paul Donofrio said that expenses in 2019 and 2020 will be lumpy due to "physical and digital expansion." Bank of America will also raise its minimum wage to $15 an hour. Donofrio said despite those investments Bank of America is hoping to keep expenses at its 2018 levels.
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Digital for Bank of America is summarized by a "high-tech, high-touch" strategy across its units including Merrill Lynch, which has 60 percent of clients using an online or mobile platform across the company.
Moynihan explained:
I think our ability to continue to drive productivity is really driven by the change in customer behavior in the digital capabilities we have. So more of the activity that would've been done a decade ago or 2 decades ago, a person handing a check for deposit to branches would have gone through person's hands and now goes through mobile bank deposit.
Bank of America reported first quarter net income of $7.3 billion, or 70 cents a share, on revenue of $23 billion, roughly flat from a year ago.
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