Bank of America’s Bold Strategy to Boost Profits
Bank of America Corp. is making a strategic shift in its approach to credit cards. This move forms part of an ambitious plan to double its profits from consumers within the decade. This month, the bank plans to roll out enticing new incentives for cardholders with higher account balances. It’s a key part of the bank’s strategy to increase the annual profit of its consumer unit to $20 billion by the end of the decade, a target that has only been reached twice in the history of the US banking industry.
Investing in Technology and Customer Outreach
Bank of America is investing significantly in the use of artificial intelligence (AI) to attract new customers and encourage existing ones to do more business. “The focus is on growth,” explains Holly O’Neill, head of Bank of America’s consumer business. “Card is a big piece of this growth as we move forward and get more targeted with our outreach.”
With a strategy that encompasses a broader customer base, effective use of technology for data analysis, and cost-cutting, the bank aims to increase its consumer base from the current 69 million to 75 million by 2030.
Since the global financial crisis in 2008, Bank of America has moved its loan portfolio away from riskier borrowers. This standard is set to remain, but advances in technology are aiding the bank in underwriting more loans, explains O’Neill.
A Shift in Credit Card Strategy
While competitors such as JPMorgan Chase & Co. and American Express Co. have invested heavily in rewards for premium cards and expanded their co-brand credit cards, Bank of America has traditionally focused on no-fee, cash-back cards. Now, it is looking to extend its work with existing co-brand partners, such as Alaska Air Group Inc., Royal Caribbean Cruises Ltd., and Norwegian Cruise Line Holdings Ltd.
Bank of America’s credit cards have had mixed results in J.D. Power’s customer-satisfaction ratings, improving to No. 2 last year from No. 5 in 2024. However, for rewards credit cards with no annual fee, three out of four Bank of America cards ranked below the segment average for consumer satisfaction.
Investing in Customer Satisfaction
“While we have a high penetration, there is still the opportunity to deepen and make our products more attractive to clients,” says Mary Hines Droesch, head of consumer and small-business products and analytics. “We’re very successful with cash back, but we could do even more.”
However, these improvements come with a cost. It typically takes three to five years for a lender to break even after spending on marketing and incentives such as sign-on bonuses. To attract new card customers, Bank of America recently doubled its cash-back percentage to 6% for the first year on a spending category of the customer’s choice.
Using AI to Evaluate Borrowers
The use of AI is helping the bank to analyze more data sources to find consumers and tailor their outreach at opportune moments. This technology is also helping the bank to evaluate borrowers for their potential to default. A customer with no credit history, who would have previously struggled to get approved for a card, now stands a better chance as AI helps to sift through additional consumer information to assess risk.
“As technology improves, and as you are able to better leverage data and analytics you have on your client base, it gives you better insight to underwrite within your risk parameters,” O’Neill explains.
Looking to the Future
Bank of America is also looking at new ways to engage with consumers in physical spaces. It added 50 sites last year and renovated 150 existing financial centers. It plans to open up to 100 more by the end of next year, all in locations it’s identified as high-growth areas.
The bank is also exploring the potential of its AI agent, Erica, to improve efficiency and reduce staffing costs. “The pace with which it will come down will be dependent on the effectiveness of the technology and client adoption,” O’Neill says.
While Bank of America’s ambitious plan to double its consumer profits presents a significant challenge, the lender is optimistic that its technology-driven approach will yield positive results. As Mike Mayo, analyst at Wells Fargo & Co., said in an interview, “We’d love to be pleasantly surprised if Bank of America can somehow leverage its technology edge to supercharge these trends.”
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