For the first time in 23 years, JPMorgan Chase is the largest US bank by deposits, a distinction Bank of America (BofA) held for nearly 20 years, according to the Charlotte Observer citing data from the Federal Deposit Insurance Corporation.
Chase, which was already the largest US bank by assets, saw its customers add $96 billion to their accounts over the last year to reach $1.3 trillion, a 7.9% increase year-over-year (YoY), surpassing BofA’s $1.29 trillion. This milestone comes at a time when banks have been aggressively jockeying to capture a larger share of financial transactions, which has placed an increased focus on card rewards and digital channels.
By leveraging their rewards programs and digital channels, banks are hoping to spur growth in key areas.
- Banks are offering some of the highest card rewards ever seen to increase spend and adoption of card products. In fact, the six largest credit card issuers incurred an estimated $22.6 billion in credit card rewards expenses in 2016, more than double the costs seen in 2010, according to Instinet data cited by the Financial Times. However, for banks, these rewards appear to pay for themselves in adoption and spend — for example, after launching its reward-filled Sapphire Reserve card, Chase reported a 35% increase in new card accounts in Q3 2016, and an over 50% lift on credit card spending.
- Digital channels are also playing a bigger part in reaching consumers. Three of the US’ largest banks have been consistently adding millions of users to their mobile banking apps YoY — as of Q2 2017, Chase had 28.4 million mobile users, BofA had 22.9 million, and Wells Fargo boasted 20.4 million.
- Being able to reach consumers in channels of their choosing will likely increase transactions. BofA reported more than 1 billion digital interactions with its customers in Q2 2017, for example, which resulted in more mobile transactions — mobile deposits represented 21% of all deposits, up from 17% a year ago.
Strategic investments will be essential for banks looking to capture a piece of consumer spending without opening themselves up to massive losses. Household debt shows that consumers have a healthy appetite for financial products, such as credit cards and loans — total household debt in the US climbed to $12.8 trillion in Q2 2017, surpassing pre recessionary highs of $12.7 trillion in Q3 2008. But it’s important to note that being too aggressive in going after this spend could be costly — although Chase’s Sapphire Reserve card is seen as a success, it’s still not expected to break-even for five-and-a-half years. Thus, banks should focus on investments that not only strengthen their brands, but also cut costs. One such investment is artificial intelligence (AI), which can be used to interact with consumers and offer products based on customers’ specific needs and interests.
Dan Van Dyke, senior research analyst for BI Intelligence, Business Insider’s premium research service has written a detailed report that explores the digital payments ecosystem today, its growth drivers, and where the industry is headed. The report also:
- Traces the path of an in-store card payment from processing to settlement across the key stakeholders.
- Forecasts growth and defines drivers for key digital payment types through 2021.
- Highlights five trends that are changing payments, looking at how disparate factors, such as surprise elections and fraud surges, are sparking change across the ecosystem.
You can also purchase and download the report from our research store.