A Conversation With Brian Moynihan

Mobile banking and artificial intelligence are taking enormous costs out of the banking system, says Brian Moynihan, chairman and CEO of Bank of America Corp. 

The leader of the second largest bank of the nation, at $3.2 trillion in assets, got on stage at Bank Director’s 30th annual Acquire or Be Acquired Conference on Monday to talk about changes in the industry. Jack Milligan, editor-at-large, interviewed him. Below is shortened transcript edited for clarity. 

BD: How has the industry changed in 30 years?

BM: The core purpose to help people live their financial lives hasn’t changed, but if you look down all the asset classes ⎯ mortgage funding or credit card lending or commercial funding ⎯ half of those asset classes are now outside of banking.

A concern about America’s economy is if you get too many of these assets outside the system, you’re dealing with more of a trading mentality than a lending mentality. That’s been a structural change. 

BD: I was struck during the funding crisis by the speed with which mobile tech can empty a bank of deposits. Are you concerned about that?

BM: There are a lot of ways people can get money out of the system that aren’t mobile banking, so I’m not sure I would put the device at the front. I think we have to flip it the other way: Customers want mobile banking and payment systems, and this device is allowing the industry to take out massive costs and return it to the customers.

BD: Let’s talk about artificial intelligence. What has your experience been with Erica and what else do you have going on in terms of AI?

BM: We started Erica 10-plus years ago to do natural language processing and analysis to serve customers. Is it a predictive model? Yes. You type in certain words, and it will predict the outcome from history. For example, people would call us 6 million times a month and ask us what the routing number is. Erica can take away those routine things. That’s good. Last quarter, 18 million people used it 180 million times. 

Where it goes is another question. When you think of a regulated industry like banking, all of us have had credit scoring models for years, so the idea of using machines to learn and process and make decisions is not new. But it’s going to require great data, great transmission systems and great capabilities to do the analytics and models that are structured for (specific) tasks. 

BD: Let’s switch to regulation and the Basel III endgame proposals. I’m seeing numbers for the big four banks as high as 20% in terms of additional capital you’d need to raise. You can’t be thrilled.

BM: My question is what is causing the need to have more capital? What’s the cost-benefit analysis? The proposals would require us to have $195 billion in CET1, which we already have today. It wouldn’t require us to raise more capital, but it would trap capital that could have been used to make something like $500 billion in loans. Is that what you want?

BD: How many employees does Bank of America have?

BM: 213,328, but who’s counting?

BD: How do you communicate with all of them and drive the message?

You’ve got to repeat yourself and say the same thing over and over again. If I do an event like this, 20% weren’t there three years ago. It’s hard with a large organization but after 15 years, there’s not a big mystery.