Bank of America Corp (BAC.N) and Wells Fargo & Co (WFC.N) are rolling out more retail services accessed by mobile phones, including check deposits, as the banking sector races to cut costs in a tepid economy.
Starting Thursday, Bank of America will allow customers to make deposits by submitting a photo of a check through their smart phones, the bank's online and mobile banking executive, Aditya Bhasin, said on Monday. The No. 2 U.S. bank is also rolling out a service allowing customers to send money to other individuals using their email address or mobile numbers, as well as expanding a coupon service that can be used by mobile customers.
Wells Fargo launched its mobile check deposit service earlier this year and will gradually expand it across the United States by the end of the year, said Brian Pearce, head of the retail mobile channel at the bank. Earlier this year, the No. 4 U.S. bank launched its money transfer service, which is part of a joint venture between Wells, Bank of America and JPMorgan Chase & Co (JPM.N) called clearXchange.
The latest roll-outs mean two of the largest U.S. banks are adding mobile banking services that are increasingly popular with consumers. Combined, Bank of America and Wells Fargo have nearly 20 million active mobile banking users across the United States.
Executives at both banks stress they are focused on evolving customer needs, but banks for decades have also been looking to cut costs by moving transactions to ATMs, online banking sites and now mobile devices.
Banks are hoping new mobile services will eventually cost less than handling transactions in branches, even if there are high upfront costs, said Peter Olynick, card and payments leader at Carlisle & Gallagher Consulting Group.
Bank of America Chief Executive Officer Brian Moynihan has said that increasing mobile use can help the bank scale back on branches and therefore cut costs.
"It is just a much more efficient and frankly strong service model," he said during the bank's second-quarter earnings conference call last week.
The bank previously said it plans to eliminate 750 branches over the next few years and, in the past year, it has quietly shed about 9 percent of its ATMs. The bank now has about 5,600 branches and 16,200 ATMs.
Bank of America spokeswoman Tara Burke said the bank's ATM numbers declined as it removed machines at Simon Property Group Inc (SPG.N) malls and in Valero Energy Corp (VLO.N) convenience stores. Many of these locations did not allow for check deposits or have 24-hour access, she said.
While the bank's ATM numbers are shrinking, its total active mobile users increased by about 600,000 to 10.3 million in the second quarter of this year from the first quarter.
Mobile payments can also help Bank of America defend its business from non-bank rivals such as eBay Inc's (EBAY.O) PayPal Inc, which are increasingly encroaching on banks' payments businesses, including person-to-person transactions, Carlisle & Gallagher's Olynick said.
"The banks that are not as aggressive are at risk to other entrants and other banks that are going aggressively after this," Olynick said.
Rivals JPMorgan Chase and Citigroup Inc (C.N), for example, already offer the check deposit service.
"Mobile deposit capture has been really positively received," said Beth Robertson, director of payments research at consulting firm Javelin Strategy & Research. "It makes things so much easier for consumers and small business."
Banks are keen to defend their position in the payments processing business, which can generate big revenue for them. Banks make about $14 billion of annual fees from processing debit cards for merchants, Javelin estimates. Credit cards are even more lucrative, with interchange fees paid in 2011 by merchants to Visa Inc (V.N) and MasterCard Inc (MA.N) banks coming in at $22.75 billion, according to industry publication The Nilson Report.
AN INTEGRAL PART OF LIFE
In another service available for mobile customers, Bank of America is expanding a coupon program that allows customers to receive discounts from retailers by clicking on offers sent directly to their online banking accounts. The bank began testing BankAmeriDeals in January and is now making it available across the United States by early August, Bhasin said.
The strategy offers discounts to customers, while also encouraging customers to use their Bank of America debit and credit cards.
"There are more rewards for them and more benefits for us as well," Bhasin said.
Meanwhile, Wells Fargo, which has 8.5 million active mobile users, started allowing customers to deposit checks with their phones in May, Pearce said. It is now available in six states, plus California's Bay Area, and should be nationwide by the end of the year.
The bank in May also unveiled its own person-to-person money transfer service, which allows customers to send money to other individuals using a mobile number or email address, rather than an account number. The bank currently allows customers to send money to Wells Fargo and Bank of America customers, but will add JPMorgan recipients by year's end.
Bank of America money transfer service allows customers to send money to individuals with accounts at all three banks, plus others. JPMorgan said it has not rolled out a clearXchange program yet.
Banks are increasingly finding that mobile banking is critical for interacting with their customers, Wells Fargo's Pearce said.
"This mobile lifestyle has emerged," he said. "People take their mobile devices everywhere they go and it's become this integral part of their life." (Reporting By Rick Rothacker in Charlotte, North Carolina; editing by Andre Grenon)