Bank of America Corp., which spends about $1 billion a year handling cash, will save money and require fewer employees as more customers make payments electronically, Chief Executive Officer Brian Moynihan said.
“This is just the reality: the more electronification, the less people,” Moynihan, 56, said Thursday in an interview on Bloomberg Television. “It’s the way we’ve gone from 280,000 people to 211,000.”
Bank of America is among large lenders including JPMorgan Chase & Co. and Wells Fargo & Co. that are part of clearXchange, a payments network that connects 100 million online banking customers and allows them to transfer money instantly from one account to another. The banks are hoping the partnership will mount a real defense against the growing popularity among millennials of services such as PayPal Holdings Inc.’s Venmo, while also cutting costs.
“It’s more secure and more safe if people are carrying less cash,” Moynihan said. “But the methodology of transfer has to be easy, and that’s what we’re developing.’
Moynihan said the idea is to make such person-to-person payments “as ubiquitous as checks.” He said clearing checks, keeping automated teller machines stocked and providing merchants with currency make up the bulk of the firm’s cash-handling costs.
Moving customers into online and digital banking has allowed Charlotte, North Carolina-based Bank of America to reduce the number of branches to 4,600 from 6,100 about eight years ago, Moynihan said. During that time, the lender has reduced the number of employees in the consumer bank by 40 percent to 60,000, he said.
Moynihan reiterated his cost-cutting plan Thursday, saying the lender will reduce total expenses by about $4 billion to $53 billion by the end of 2018.
Separately, Moynihan said the bank’s commercial real estate loan portfolio, currently valued at about $60 billion, is again growing slowly after declining in the years following the financial crisis. U.S. regulators including the Comptroller of the Currency recently warned of a rise in credit risk from increased lending and looser underwriting, especially in commercial mortgages.
“What’s in that book is very carefully crafted, and so we’re fairly conservative there because it’s gotten us in trouble,” Moynihan said. “Real estate is very locally tied and that’s why the comptroller is very concerned about it. And yet they’re the easiest loans to do. There’s always demand.”