Banking is a business of increments and multiples.
In the fourth quarter of last year, Bank of America (NYSE:BAC) didn't earn $4.3 billion from one customer in one transaction. It instead earned a few cents each time customers used their debit or credit cards to make purchases. Or it earned a handful of dollars each time customers overdrafted their checking accounts, which probably happened tens of thousands of times.
The point is that each incremental addition to its top and bottom line was small. But because there were so many of them, they added up to a big number.
The same is true on the expense side. Bank of America CEO Brian Moynihan made this point in a recent interview on CNBC when he mentioned how much the bank spends each year on the mundane task of handling cash and checks:
We still spend about $5 billion moving cash, currency, and checks around our company. Our ATMs distribute about $200 million a day in cash. Do you know how much work it is to get that cash in those machines?
This is an interesting fact. Who knew that moving around pieces of paper could be so expensive? Never mind the fact that few banks in the country even come close to earning $5 billion a year, much less having that amount to spend on dealing with cash and checks.
But the significance of this figure goes beyond trivia, which is why Moynihan brought it up in the first place. What it shows is just how much more costs can be wrung out of the North Carolina-based bank's operations as its customers continue to adopt mobile technologies.
This is why Bank of America is so happy about its 22 million customers who actively use its mobile app to deposit checks, as well as to view account balances and schedule appointments with personal bankers in its branches. One in five checks deposited into Bank of America accounts nowadays are done on its mobile app, with the physical checks never entering its system.
This is also why Bank of America and other banks were so quick to sign onto third-party mobile payment apps such as Apple Pay and Samsung Pay. And it explains why the $2.2 trillion bank encourages customers to use their credit cards by offering them rewards to do so.
All of these innovations reduce the use of cash and checks, which, as we now know, cost a lot more to move from one place to another than anyone would have imagined.