Bank of America Corp.’s fight against financial technology challengers appear to be making some headway, at least with its entry-level checking account.
The Charlotte, N.C., bank said last week its Advantage SafeBalance Banking program now counts more than three million client accounts, up from 2.1 million at the start of September in 2020.
It’s the bank’s quickest-growing checking account program, aimed at younger prospective clients — such as college students as well as people from less lucrative professions — looking to open up their first bank account or repair their credit. All told, more than 1 million college students now use the account type as total students accounts at the bank rose 50% in the past year.
“We’ve looked at our retail base and looked at what clients want and are asking for — convenience, flexibility and to help them bank where they want and when they want and to grow with us,” said Christine Channels, head of community banking and client protection at Bank of America
The bank has been weaving in related products, such a secured credit card requiring a $300 deposit up front that’s designed to boost credit scores, as well as low interest loans of up to $500 to help customers manage short-term liquidity needs.
It often starts with setting up a checking account and keeping it in good standing with the program such as the Advantage SafeBalance account. The account does not offer traditional paper checks, but customers tend not to use them anyway.
The bank’s push to appeal to people’s desire for greater financial health comes as Americans overall have been improving their credit scores.
At the same time, Bank of America and other traditional lenders face challenges from financial technology companies. Research firm CB Insights recently listed nearly 50 fintech rivals of Bank of America across its eight major business lines. Those competitors include at least eight in the consumer savings and deposit business: Chime, Current, Dave, Marcus by Goldman Sachs
Monzo, N26, Revolut and Varo, according to CB Insights.
Amid the noise from these and other players, Bank of America said its non-interest accounts, which include many of its checking accounts, rose to $425 billion in total balances in the second quarter, up from $405 billion in the first quarter and ahead of the year-ago total of $362 billion.
While the bank does not break out revenue or other performance numbers for its retail banking activities, CEO Brian Moynihan said on July 14 the bank notched its best net sales growth in checking accounts since the second quarter of 2015.
For its part, the Advantage SafeBalance Banking checking account will decline your transaction if you don’t have funds available in your account for a payment, instead of allowing an overdraft or an overdraft fee to occur.
The account does not pay interest or allow you to write paper checks, but it offers full online and mobile banking. At $4.95 a month, the monthly account fee is lower than others in the industry. The fee is also waived anyway for eligible students under age 24 and customers in the bank’s preferred rewards program.
The bank has been eliminating or reducing overdraft fees since 2009 when it stopped allowing overdraft fees on point-of-sale debit card transactions. It launched its Advantage SafeBalance Banking product in 2014 and has been developing products that help clients budget, save, borrow and spend.
In March, it nationally launched its Balance Assist program that offers short-term loans of up to $500 for a flat fee of $5. It’s then paid off in three installments in 90 days. At last check, the Balance Assist program has counted 100,000 loans.
Advantage SafeBalance also stands out as one of the first programs certified by BankOn, a consumer advocate nonprofit that currently lists about 120 bank accounts that meet its standards for consumers.
Bank of America has been getting the word out on its entry level banking products via email, alerts in mobile apps, and offering additional information and guidance at its branches and call centers.
“We’ve talked to consumer advocacy groups and we’ve talked to our clients and they like having digital accounts,” said Erin McCullen, head of consumer deposit products at Bank of America. “They can also participate in programs around better money habits and over time they can build up their credit ratings and move toward home ownership.”
All told, Bank of America shares are up 34.7% so far this year, compared to a rise of 18.7% by the S&P 500