Bank of America is restructuring its credit card business model as part of an effort to double profits from its consumer operations. The bank is advancing a plan to achieve one of the most ambitious financial targets it set last year.
This month, the bank plans to introduce new incentives targeting cardholders with high account balances. Revamping its rewards program is a central initiative, with the goal of increasing the consumer division's annual profit to $20 billion by the end of this decade—a feat achieved only twice before in the history of U.S. banking.
Executives stated in interviews that, as part of a broader expansion of its consumer business, the bank is investing millions of dollars and leveraging artificial intelligence to attract new customers and persuade existing clients to conduct more business with the bank.
"The core focus is on growth," said Holly O'Neill, the 54-year-old head of consumer banking at Bank of America. "Credit cards are a key segment for our future growth, and we will engage in more targeted customer outreach."
To achieve its objectives, the bank is adopting a multi-pronged strategy: expanding its customer base, using technology to mine more data for customer engagement, and reducing expenses. Currently, Bank of America serves 69 million customers and operates 3,650 branches across 39 states. Its goal is to increase its customer count to 75 million by 2030.
O’Neill, who was promoted last year to president of consumer, retail, and preferred banking at the Charlotte, North Carolina-based company, noted in an interview at her Boston office that since the 2008 global financial crisis, the bank has shifted its loan portfolio away from high-risk borrowers toward lower-risk segments. Credit standards have not changed, but technology is helping the bank approve more loans.
While competitors such as JPMorgan Chase and American Express invest heavily in rewards for premium credit cards and expand co-branded card portfolios in travel and retail, Bank of America has appeared content to focus on no-annual-fee, cash-back credit cards. Now, the bank is seeking deeper collaboration with existing co-brand partners, including Alaska Air Group, Royal Caribbean Cruises Ltd., and Norwegian Cruise Line Holdings Ltd.
Over the past five years, Bank of America's credit card satisfaction ranking in J.D. Power studies has fluctuated, rising from fifth place in 2024 to second last year. During the same period, American Express consistently held the top spot. In the no-annual-fee rewards credit card category, three of Bank of America’s four cards scored below the industry average for customer satisfaction.
"Even with our high market penetration, there is still opportunity to deepen relationships and make our products more appealing to customers," said Mary Hines Droesch, head of consumer and small business products and analytics. "Our cash-back business is very successful, but we can do even better."
These efforts come at a cost. After spending on marketing and incentives such as sign-up bonuses, banks typically take three to five years to break even on a new cardholder. Bank of America recently doubled the cash-back rate for new cardholders to 6% in their first year, applicable to a category of their choice.
Droesch noted that technology is helping the bank screen customers from more data sources and tailor outreach at opportune moments, such as when a prospective client gets married or buys a home.
This technology is also applied to assess borrowers' default risk. O’Neill said that while customers with no prior credit history previously struggled to get approved for a card, they now have a better chance even as the bank maintains its credit standards. AI helps evaluate risk by analyzing more consumer information.
"With advances in technology, we can better utilize customer data and analytics to gain clearer insights within our risk parameters and achieve more precise loan approvals," she said.
For more complex loan products like mortgages, Bank of America is also increasingly relying on AI. Matt Gellene, head of specialized client solutions for consumers, said the bank is using AI to overhaul the loan processing workflow, which is expected to result in more approved applications.
The bank is also preparing for a potential resurgence in homebuying demand, should borrowing costs continue to decline.
"We are preparing for it every day—ensuring our mortgage business is resilient enough that when rates fall, we can quickly seize the opportunity," O’Neill said.
The bank is exploring new ways to interact with customers through physical channels. Last year, it opened 50 new branches while closing a similar number, and it renovated 150 existing financial centers—a term the bank prefers over "branches." It plans to open up to 100 additional branches in what it identifies as high-growth areas by the end of next year.
Within these financial centers, experienced bankers are expected to handle both major transactions—such as assisting with mortgage applications or opening investment accounts—and smaller daily tasks like cash withdrawals, as some customers still prefer human service over ATMs.
At the intersection of 59th Street and Third Avenue in Manhattan, these changes are already visible. Bank of America now occupies a glass-walled building opposite an older financial center. Visitors encounter sofas and side tables reminiscent of a hotel lobby, with teller counters located only on the second floor.
"In terms of direction, this is the new model," O’Neill said. "The question in my mind is: when will teller counters disappear entirely?"
Currently, about 55,000 Bank of America employees work in financial centers. O’Neill indicated that this number will gradually decline as AI and other efficiency-enhancing technologies are adopted. "The pace of reduction will depend on the effectiveness of the technology and customer acceptance," she said.
For now, the bank is deploying its AI assistant, Erica, to the desktops of financial center employees. O’Neill described this as equipping staff with an additional "brain." Over time, she said, the technology will help employees work more efficiently, reducing the need for new hires.
Wells Fargo analyst Mike Mayo remarked in an interview that the biggest unknown is whether digital tools will help banks achieve expected gains in efficiency and profitability. He described the target as "a more promising vision."
"If Bank of America can leverage its technological edge to leapfrog these trends, we would be pleasantly surprised," he said. "But whether that part materializes remains to be seen."
Comments