As part of its quest to move operations to a software-defined infrastructure, Bank of America announced that it will close three of its data centers, American Banker reported.
While the company disclosed that it would record a $300 million charge in the second quarter as a result, it’s just a matter of time before the closures save money.
That's a small amount, compared to the $1 billion to $1.5 billion in annual cost savings CEO Brian Moynihan told shareholders the company has identified from its scheme to consolidate and digitize operations. BofA can also sell the three data centers, but he said no decision had been made yet.
Believing that such an infrastructure is the future of finance, BofA created a private cloud system a few years ago to accommodate massive network, storage, and server capacities to support its approximately 4,600 retail financial centers, 16,000 ATMs, and 34 million active online accounts.
Today, Moynihan said, the goal is to have 80 percent of all the bank’s systems running in software-defined data centers within two years.
The bank has also become more savvy and efficient in mobile banking, tripling its digital budget in 2016, according to the report. It added 2.5 million new mobile customers over the past 12 months, increasing the total to 20 million active users of its mobile app. Now, mobile check deposits represent 17 percent of BofA’s deposit transactions.
Typically, its customers process 280,000 mobile deposits per day, an increase of 28 percent year-over-year and equivalent to 800 financial centers. Each mobile deposit costs the company 90 percent less than an in-branch deposit.
Savings moving forward could also come from the move to replace paper statements with electronic versions and to convert its fixed-income and equities trading platforms to less laborious digital platforms, which Moynihan referred to as “electronification.”
As part of its long-time cost-cutting measures, BofA will record another $125 million of severance costs as it continues to reduce headcount throughout the company, Moynihan said. The severance costs are not related to the data center closings and are primarily tied to termination of higher-salaried managers.