Bank of America sees strong results as digital platform delivers growth

Derek du Preez Profile picture for user ddpreez January 20, 2022 Audio mode
Bank of America CEO Brian Moynihan says that it would be “dangerous” to be satisfied and that the ability to improve the platform is “infinite”

Image of Bank of America logo
(Image sourced via Bank of America )

Bank of America's technology investments continue to deliver returns, as growth in usage across all platforms continues to soar. The Bank's leadership team point to digital capabilities as being key to its success, as the organization's fourth quarter results defied industry trends. 

More importantly, CEO Brian Moynihan points to continued investment as he told investors that ‘improvement in the platform is infinite'. diginomica reported last year how profits were soaring at Bank of America, as digital engagement grew during the COVID-19 pandemic. 

In terms of numbers, net income during the fourth quarter rose 28% to $7 billion and revenue increased 10% to $22.1 billion. Expenses did rise by 6% to $14.7 billion, but CFO Alastair Borthwick said that this was down to investing in the Bank's ‘people and capabilities to grow the franchise', but that lower COVID-19 costs and further digital engagement had helped to offset some of the increases.

In terms of growth in Bank of America's digital engagement, during the fourth quarter the bank reported that: 

  • 70% of overall households actively using digital platforms

  • 41.4 million active digital banking users, up 5%, or 2.0 million

  • 1.5 million digital sales, up 46%

  • 2.7 billion digital logins

  • 15.8 million active Zelle users, now including small businesses, sent and received 218 million transfers worth $65 billion, up 39% and 53% YoY, respectively

  • Clients booked 764,000 digital appointments

CEO Brian Moynihan said: 

"The best way to highlight the drivers behind the earnings success is to look at the momentum in client activity across the businesses. This shows our organic growth engine is running hard and more and more of this client activity is powered by our digital transformation, which is foundational to everything we do.

Consumers logged into our digital channels more than 2.7 billion times in the fourth quarter alone. Erica, our digital financial assistant, completed more than 400 million requests from our clients in the year 2021. Half our consumer sales were digital in the fourth quarter. 86% of all the check deposit transactions are now digital. Customers used Zelle to transfer $65 billion in the most recent quarter. The number of Zelle transactions now surpasses the checks written by our consumers.

So the digital journey continues, and that supercharges our relationship manager-driven model. And together, that has driven the growth in loans and deposits and fees.

Bank of America also saw its cash and check volumes decrease by 24% during 2021, compared to 2019, which Moynihan said simply reflects that "more customers are using digital capabilities to achieve their goals each year". He added: 

Now importantly, though, this allows us to grow our consumer business with lower cost. 

The future of the platform

Bank of America appears to understand that digital investments don't happen in isolation and that its business model is now embedded in the digital economy. CFO Borthwick said that the Bank will "continue to invest in technology and people at a high rate", but it was CEO Moynihan's comments that were more pertinent. 

Moynihan said that Bank of America will never have the "temerity" to say that it knows every possible competitive thing that could happen over the next decade, but what it can control is what it invests in and where - pointing to the company's $3 billion to $3.5 billion investment in scaling technology, year after year. He said: 

I'd say, we've sustained our technology investments all the way through the pandemic. We've sustained our financial center renovations. We've sustained our marketing. We've sustained our investment in relationship managers. And the result of that is, in many cases, record client experience. 

And you can see, I think, in our numbers that we're doing more business with our existing clients. We're adding net new clients and we're growing market share, and we're getting third-party recognition as well. So, I think it's result is how you will judge us on the technology, but we're obviously very competitive in that regard.

Moynihan said that Bank of America's ability to continue to improve its platform is "infinite"., pointing to its digital assistant Erica as an example. Usage of Erica has gone up from 17 million users to 24 million users, with interactions jumping from 30 million to 120 million over the past year, because of feature functionality and capability additions. 

Commenting on the future of Bank of America's digital platforms, Moynihan said: 

We'll never be at an end state. I mean, that's where we continue to drive investment, digital sales capabilities. We're only starting to be able to take full advantage of it, frankly, across the platform because we had to get end-to-end - get it all knocked together. It's kind of interesting because it's growing quickly now. So, small business capabilities, the whole merchant services, we finally got a new platform out as a cost of $300 million - it's now being sold. Those are major investments.

So, the question is: do we appeal? We open twice the population rate for people between the ages of 18 and 24 in terms of new accounts. We seem to be gaining share in that segment and the usage by segment is high. And so, we feel very good about our platform's appeal. And then, look at Merrill Edge, 500,000 new accounts, $70,000 average balance. Those are deep clients with real money put into work.

However, this is also no time for complacency. Moynihan added: 

So, are we satisfied? Yes, we can look at all the awards and the growth and feel good - and feel spectacularly good about it. But you can be satisfied that way, but that would be dangerous. So, we continue to invest, and you can see the numbers of patents we get, we see everything, we will continue to invest heavily in this platform. 

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