Erica might just be Bank of America’s most valuable employee. But unlike the more than 200,000 staffers who work for the financial giant, she is a virtual financial assistant and not made of flesh and blood. Her meteoric rise—19.5 million customers used Erica in the first quarter of this year, up 60% from the year-earlier period—illustrates the new digital directions of banking stalwarts like Bank of America, Chase and Citi as physical branches shutter or lose relevancy and customers of all ages move online in droves.
“It used to be only certain groups would tolerate mobile banking,” says Christian Beaudoin, managing director research at real estate company Jones Lang LaSalle. “Now all age groups of society are getting used to the idea of remote banking and electronic transactions.”
Long before the pandemic, retail bank branches were already on the decline as consolidation and new methods of banking compelled brands to prune their real estate holdings. Between 2017 and 2020, the U.S. lost 4,500 bank locations, a 5% drop that was subsequently accelerated by COVID-19 in areas like New York, which hit its largest closure rate in two decades late last year. Last year, the number of branches fell nearly 2% from 2019 to 85,050—compared with 98,000 branches a decade ago, according to JLL, which has been running an annual report examining the sector since 2016.
Digital banking has been on the rise for years, but the pandemic supercharged the trend. Mobile banking adoption grew 66% last year, amid temporary and permanent branch closures, JLL found. Bank of America introduced Erica three years ago, but it did not gain serious momentum until lockdowns forced consumers to bank online. Bank of America recorded 105.6 million interactions with Erica in the first quarter of 2021, compared with 27.8 million in the year-earlier period and 16.5 in the first quarter of 2019.
“With everything shut down, people realized just how capable the digital banking portal could be,” says Michael Perito, an analyst at Keefe, Bruyette & Woods. While physical branches still serve a purpose—as a marketing tool or to provide a place for high-end services—even those factors are fading in relevance.
Perito notes that during the pandemic, consumers discovered that tasks such as account openings, traditionally done in person, could also be done digitally—opening the door to new marketing efforts from banks. “You started to see not only a huge acceleration in foot traffic reduction,” Perito says, “But banks saw the other side of the coin—their digital adoption engagement was rising and that gave more confidence that they could use the digital channel as an account opening tool when historically they’d been more reliant on bank branches to do that.”