Cost to banks for digital transactions: 25 cents.
Cost with a teller: $3-$4
Bank of America: Your branch is now in your pocket
There aren’t many reasons to stop by your local bank branch these days.
“People effectively carry a branch in their pocket,” said Bank of America Corp. BAC -0.43% CEO Brian Moynihan, as he ran through the bank’s earnings with analysts on Wednesday.
Indeed, most of the reasons a customer has for seeing a teller are now on an app, and more people are banking that way.
At Bank of America, the number of mobile-banking customers surged 19%, to 15 million, in the first quarter from a year earlier, and 10% of all deposits are now done on mobile devices. Customers use mobile devices, whether phones or tablets, to log into their accounts 165 million times a month, part of the 370 million times a month that they access an account online, the bank said.
That’s helping the bank reduce costs. The firm reported expenses in its consumer-banking business fell 4% from last year’s first quarter, and Bank of America cut 294 branches in the last year.
Granted, it’s a small respite for the bank that reported a net loss for the quarter after revealing a $6 billion litigation expense.
But the numbers for the industry don’t lie.
“Our estimates say that a teller transaction can cost up to $3-$4 each, just for simple transaction like a deposit, when you include all the fixed and variable costs including overhead.” said Ed O’Brien, director at Mercator Advisory Group, which focuses on payments and banking industries. “When you compare that to a digital transaction, that cost could be as low as 25 cents.”
Banks instead are using their branches in different ways, such as to sell financial products and offer advisory services.
“If you can do everything you would like to do on your phone, it pretty much replaces the reason you would need to go to your bank branch,” said Marty Mosby, analyst at Guggenheim Partners. “So the coverage radius of a branch went from 3-4 miles to 10 miles.”
– Sital S. Patel
