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Bank of America’s Q2 2019 earnings revealed that its digital banking users hit 37.3 million, up 4% year-over-year (Y0Y), unchanged from Q1, while mobile banking users jumped to 27.8 million, spiking 10% YoY — a slight acceleration from Q1’s 9% growth.
Further, BofA reported that its digital channel now accounts for 25% of total sales, and that mobile represents half of these digital sales. However, growth in digital’s share of sales has been decelerating, registering 22% YoY growth in Q2 2017, a 9% YoY jump in Q2 2018, and a mere 4% uptick in Q2 2019.
BofA’s decelerating digital sales growth may be occurring because existing customers already have personal banking accounts, and more complex account types require a visit to the branch. The deceleration is not necessarily a cause for alarm: BofA’s proportion of digital sales aligns with Chase’s, which also made up 25% of total sales in Q2 2019.
It’s possible that BofA customers have already opened any additional basic personal banking accounts (e.g. checking or savings) they wanted, leaving only new customers to use digital account opening for these types of accounts. Meanwhile, more complicated financial products, like mortgages, may have stricter onboarding requirements, requiring clients to handle all or part of the process in person.
The rise of digital mortgage lending could cause a bump in digital sales for banks as they work to fight nonbanks in the lucrative mortgage market:
- At $9.2 trillion, the mortgage space is the largest US lending market, and nonbanks are shaking it up. While the mortgage application process has historically been bogged down by time-consuming processes, documentation gathering, and a lack of transparency, incumbents didn’t have much reason to streamline their procedures due to a lack of competition. But with the advent of rapid digital applications from nonbank challengers like Quicken Loans, the onus has been placed on banks to refine their processes or risk serious customer attrition.
- BofA has a digital mortgage solution that could spur digital sales growth as digital channels become more popular for mortgage applications. The bank launched its “Digital Mortgage Experience” in April 2018, and the solution offers major improvements to speed the mortgage application experience like a prefill capability, access to lending specialists, and the ability to upload documents online, among others. Closing the transaction still occurs in person, but the closing time for digital mortgages is around 20 days — a significant reduction from the traditional 35-40 days. This feature may help BofA’s digital sales growth accelerate again in the future as consumers get more comfortable with digital tools and digitally savvy generations like Gen Z and millennials (who already account for the largest share of recent home buyers — 37%) account for a larger portion of mortgage applicants.
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