To see why Bank of America Corp can cut 30,000 jobs from its consumer banking business, just stop by one of the 14,000 new automatic teller machines it has installed over the last three years.
The machines scan checks and cash and allow deposits to be reflected in customer accounts the same day. A scanning ATM is faster and less prone to processing error than a teller.
Combined with the bank's other efforts to shunt customers away from tellers, the ATMs will make many consumer banking personnel all but unnecessary.
Bank of America has about 95,000 employees in consumer and small business banking. To Chief Executive Brian Moynihan, this area, and retail banking in particular, may be the bank's best opportunity for cutting costs.
The golden era of branch banking is over, analysts said.
"A branch system is simply becoming uneconomical," said Nancy Bush, a bank analyst and contributing editor at SNL Financial.
Bush estimates the industry will need 20 percent fewer branches over time due to electronic banking advances and changing customer behavior. "It just makes no sense to have a huge network."
For years, banks have raced to build and buy branches in a dash to grab as many deposits as possible.
But starting in 2010, the number of branches fell 1 percent to 98,507, according to the Federal Deposit Insurance Corp. Many of the branches that remain are likely to be slimmed down. Banks may still want deposits, but they want them cheap.
Bank of America is one of many banks that is likely to lay off retail banking staff. Analysts said Wells Fargo & Co for example, is likely to follow a similar strategy.
A Wells Fargo spokeswoman was not immediately available for comment.
Shuttering branches and laying off retail staff is a fast way to cut costs, and Bank of America's Moynihan needs quick fixes.
The biggest U.S. bank has lost more than $12 billion over the last five quarters, hurt by bad mortgages and related litigation, and its shares have lost nearly half their value this year.
The bank has deployed about 50 executives to review over 150,000 proposals for restructuring the bank, in a program known as the "New BAC." The name refers to the bank's stock symbol.
On Monday, the bank announced plans to cut 30,000 jobs from its range of consumer business units over the next several years as part of the first phase of New BAC.
Expense reductions in retail partly reflect a series of acquisitions by Moynihan's predecessors that were never properly stitched together, resulting in, for example, the bank having 63 data centers in the United States.
"That's not what we planned to have, but it's what we ended up with," Moynihan said at a conference on Monday.
Some people familiar with the bank said it has been slow to take steps such as moving to a single deposit system, which tracks the deposits a customer makes to his or her account. Arguably, uniting those systems should have happened years ago.
Bank of America is moving to a single deposit system, Moynihan told the conference. He also said that Bank of America's second wave of expense reduction efforts in other businesses may be smaller.
A THIRD OF THE COST
Rationalizing acquisitions is one source of cost cuts, but technology is important too. Automated teller machines have been accepting deposits for decades, but customers were long hesitant to use them for anything but withdrawing cash and checking balances.
Older ATMs require customers to put their checks and cash in envelopes, which remain in the machine until bank employees collect them and process them by hand. It is safe, but for many customers it feels like putting a message in a bottle.
For most banks, the check processing happens off site, meaning an armored truck has to pick up the deposits and take them to another location.
Scanning ATMs allow an image of a check to be sent to a processing center, which can now be much farther away from the bank. The ATMs often recognize the dollar amounts mentioned on the check, allowing money to be posted to an account faster. Cash deposits can be posted immediately to the customer's account. Customers can make payments for credit cards, home equity and personal loans linked to their accounts on Bank of America's new ATMs.
"Our customers don't want to wait. There's this expectation they can come in and get out quickly," said Shelley Waite, the bank's ATM channel executive, in an interview with Reuters
The popularity of the spiffed-up machines is clear: just a quarter of the bank's customers used to deposit money through ATMs while today half do -- and the percentage is growing, Waite said.
That translates into real savings. Check deposits at a scanning ATM cost the bank about 59 cents per transaction, compared with about $1.48 for teller deposits and about $1.82 for conventional ATMs, according to research firm Tower Group.
Or look at it this way: a scanning ATM can cost $45,000 and last five years for an annual cost of around $9,000. A teller typically costs around $30,000 a year, including benefits, said Darryl Demos, a managing director at consulting firm Novantas.
A branch has about seven employees on average, three or four of which would be tellers. With scanning ATMs it can likely reduce that staffing by one or two tellers, said Demos.
Scanning ATMs also allow banks to reduce their deposit processing staff.
And longer term, banks may be able to take tellers out of branches entirely, and have them work with customers remotely through video conferencing technology. Citigroup and other banks are experimenting with that kind of technology now.
Bank of America has taken other steps to reduce its branch personnel costs, including moving clients with low balances into accounts that charge a fee for using a teller.
Not every bank and every branch will use scanning ATMs to slim down staff levels. Some will replace tellers with investment advisors, mortgage lenders, or other product specialists. And some banks that pride themselves on personal service will still keep large numbers of staffers.
For as long as there have been ATMs, analysts and bankers have been forecasting the demise of tellers, but so far layoffs have been relatively modest.
But scanning ATMs, narrowing bank profits and weak loan demand should put new pressure on banks to cut staff and close branches, experts say.
Bank of America, which boasted a record 6,100 branches in 2008, today has 5,700 and plans to close around 10 percent of its branches in the coming years.
"I've been helping banks with branches for decades," Novantas' Demos said. "There's never been the sense of urgency that there is now to get it right."