Bank of America Is Changing the Game As We Know It

Bank of America (BAC 1.53%) recently announced that it will roll out a "new generation of banking centers" that could change how we all view banking. Earlier this month, the company noted the opening of an express banking center in Manhattan and its plans to open five additional centers in Boston, Charlotte, N.C., and elsewhere in New York City this year. Bank of America says these centers can "offer a more flexible schedule than a full-service branch, while integrating more benefits of technology with on-site associates who can assist customers with their financial needs."

The centers will be a hybrid between a traditional branch location and full-service ATMs, allowing customers to easily perform common transactions, with on-site associates available to offer assistance or help open new accounts. Customers using the ATM will be able to speak with a teller from 7 a.m. to 10 p.m. on weekdays and 8 a.m. to 5 p.m. on weekends. 

The ATMs will dispense cash in $1, $5, $20, and $100 increments, cash checks and return exact change, accept loan or credit card payments, and allow users to access their accounts with government-issued photo IDs.

These innovations are seemingly all geared toward making the company's banking services more accessible to millennials, as well as to others who are more comfortable with technology and may do their banking at unusual hours.

From customers to investors
These centers are in a test run, and their broader expansion for 2014 and beyond will be determined by customer feedback. But it's reasonable to think the rollout of these locations will be met with success.

Considering Bank of America has been able to add more than $17 billion in deposits despite closing 259 branches, the bank is becoming more efficient in its consumer banking operations and wants that trend to continue. Compared with the five largest banks by deposits, you'll notice an interesting trend when you explore the efficiency ratio -- which measures the cost to generate each dollar of revenue, a number that's better when it's lower -- of their consumer divisions.

Consumer banking efficiency ratio

 Source: Company earnings releases.

Not only does Bank of America already have one of the most efficient consumer banking operations, but it's also improving that mark while two other banks are getting worse.

Source: Company earnings reports.

Bank of America and US Bancorp each had efficiency ratios in their consumer banking divisions of 59% in the second quarter of 2012, yet US Bancorp's now stands at 63%, whereas Bank of America's is at 56%.

While there was no discussion in the press release related to the economics of the new express banking centers, it's not difficult to presume they probably cost less and are more profitable. Considering "express" almost always means smaller when it relates to retail outlets, it's likely these stores will have a lower cost per square foot.

If Bank of America begins to use these to replace more traditional banking centers, the costs of its retail business will probably go down even further, which will also continue to push down the efficiency ratio of its consumer business, to investors' delight.

The addition of five branches won't make any material difference to shareholders -- but if their success leads to both higher customer satisfaction and higher profits, Bank of America could have found itself a huge win.