Tag Archives: Bank of America

Leading U.S. Banks’ Commitment to Marketing Investment Continued in 2024

EMI Strategic Marketing performed a detailed analysis of advertising and marketing expenditures for c. 30 leading U.S. banks and found an 8% rise in spend in 2024, reaching more than $22.5 billion. Bank marketing spend was initially negatively impacted by COVID – falling 18% in 2020 – then it rebounded strongly by 26% in 2021 and 22% in 2022. The rate of growth has averaged 8% over the past two years, in line with a 9% CAGR since 2017.

The bank marketing ratio (advertising and marketing spend as a percentage of net revenues) rose by 22 basis points to 3.76% in 2024. This ratio has grown well above pre-pandemic levels.

  • Traditional banks are investing to build their brands to support expansion into new geographic markets and new financial categories and to counter the growing threat from fintechs
  • Digital challengers like SoFi and LendingClub have made significant investments in marketing to build brand awareness

The overall rise in marketing spending was driven by leading financial advertisers like American Express (up 18% to $6.3 billion) and Capital One (up 14% to $4.6 billion). Both banks invested more than 10% of their net revenues on marketing. They were among the five banks – including JPMorgan Chase (up 7% to $4.9 billion), Bank of America (up 2% to $1.8 billion) and Citi (down 4% to $1.1 billion) – that spent more than $1 billion in marketing in 2024.

Although Citi was one of several banks that reduced their marketing budgets in 2024, it is important to apply a longer lens to some of the banks. For example, U.S. Bank reduced its advertising and marketing spend from $623 million in 2023 to $503 million in 2024. However, since its annual spend was less than $400 million between 2018 and 2022, its 2024 spend represents its continued strong commitment to marketing investment. The chart below shows the change in advertising and marketing by banks between 2023 and 2024 and also includes marketing ratios as well as change in spend from the years 2019 (pre-COVID) to 2024. (The extent and timing of advertising campaigns can also impact overall spend levels from year to year.)

There is a significant difference in marketing ratios between different bank categories:

  • Card-Centric banks (e.g., American Express, Capital One, Discover) have high marketing ratios as they aggressively market credit cards (and in many cases personal loans) nationally.
  • Direct banks/fintechs (e.g., SoFi, Ally, Varo) need to build brand awareness in order to market their financial solutions nationally, and do not have the benefits – and the costs – of a branch network.
  • National banks like JPMorgan Chase and Bank of America look to build their brand across the U.S., while also devoting marketing to support their branch presence.
  • Super regional and regional banks concentrate more of their marketing resources within their footprints.

For 2025, we expect that bank marketing spending will continue to rise, based on:

  • Strong macroeconomic conditions
  • Increased consumer and business confidence
  • Digital challengers building their brands to raise awareness and win share from traditional banks
  • Traditional banks investing in established and emerging marketing channels to thwart competitive inroads from digital challengers, support expansion into new markets, and make up for the scaling back of branch networks in existing markets

Leading U.S. Banks Boosted Marketing Spend in 2022

An EMI Strategic Marketing analysis of 30 leading U.S. banks found strong overall growth in marketing budgets for the second consecutive year. Following an 18% decline in 2020 in the midst of the COVID-19 pandemic, these leading banks have grown their marketing budgets by 53% over the past two years.

Five banks – American Express, Capital One, JPMorgan Chase, Citi and Bank of America – each spent more than $1 billion in advertising and marketing in 2022. Discover was just below this threshold.

These banks’ average marketing ratio (marketing spend as a percentage of net revenues) rose by 34 basis points (bps) to 3.65% in 2022.

There is significant variation in bank marketing ratios between – and within – different banking categories.

  • Card-centric banks like American Express and Discover tend to have high marketing ratios as they have national reach but no branch networks.
  • Direct banks also have relatively high marketing ratios as they lack branch networks. Newer challenger banks are also investing significantly in marketing to build customers, deposits and assets.
  • More ‘traditional’ bricks-and-mortar banks typically have marketing ratios in the 1-3% range, although even in these categories we see significant variation as individual banks pursued different marketing objectives. Regional banks like Cadence Bank (+285% to $42 million) and BMO (+23% to $128 million) ramped up budgets in 2022 to promote brand overhauls. Super regional banks like Citizens (+38% to $184 million) and M&T Bank (+41% to $91 million) significantly grew their marketing spend to support entry into new markets following recent acquisitions.

Going into 2023, the projected trajectory for bank marketing spend is less clear, with rising inflation and slowing economic growth forcing banks to look for ways to reduce expenses. In addition, because they have grown budgets in recent years, some leading banks may decide to pause or even scale back their marketing budgets in 2023. However, many have stated their commitment to maintaining or even growing their marketing investment to support specific business strategies.

  • Discover expects double-digit growth in marketing spend as it pursues growth opportunities in credit card and deposits. It also claims that it continues to see strong returns on its investments.
  • Fifth Third plans to increase marketing spend in the mid-single digits in 2023 as it targets customer acquisition in the Southeast.
  • Axos Bank is maintaining higher spend levels as it seeks to grow deposits in an increasing competitive market.

5 Key Digital Banking Trends in 4Q21

As the banking ecosystem moves to a digital-first profile, we have identified the following five trends that shaped digital banking during the most recent quarter. Furthermore, we expect that these trends will persist into 2022.

Not only has digital banking achieved critical mass, recent surveys have found that it has become an indispensable tool in people’s lives.

Recent years have seen digital challengers engaged in a land grab in a market characterized by very strong growth and relatively low barriers to entry. Several digital banks have attained significant scale while others have established a strong presence within a specific market niche. However, we are now seeing signs of a shakeout in the digital bank sector in 4Q21 with pullbacks, market departures and consolidation.

  • Monzo and N26 both announced during the quarter that they were quitting the U.S. market.
  • MoneyLion announced the acquisition of Even Financial for $440 million.
  • Google dropped plans to offer bank accounts to its users.

Traditional banks are addressing the threat from digital banks by continuing to grow their digital user base, adding new digital functionality, improving the digital user experience (UX) and acquiring/partnering with fintechs.

  • Bank of America continues to lead the way in digital banking engagement among the main U.S. banks. In October, it reported that 5 million clients were using Life Plan, its personalized digital financial planning experience.
  • U.S. Bank is also a leader in driving digital banking penetration among its customer base; digital customers represented 70% of its total active customers at the end of 3Q21.
  • According to an Atos survey, 66% of bank leaders named transforming the digital experience as a top priority.

Younger demographic segments represent the key battleground between traditional and digital banks.

  • Traditional banks tend to have higher levels of trust and loyalty among older segments, a fact that is increasingly recognized by the banks themselves; a Bank Director survey found that 95% of financial executives believe that they have the tools in place to effectively serve baby boomers. However, only 43% believe that this is case for Millennials.
  • According to a Plaid survey, younger segments have the highest fintech adoption, led by Millennials at 95%, followed by Gen X at 89%, and Gen Z at 87%. (Boomers’ fintech adoption rate was 79%.)

While traditional banks migrate to a digital-first approach, they believe that clients will continue to value the branch channel.

Many banks are announcing branch reductions as they reduce branch density. Our analysis of FDIC SDI data on domestic U.S. branches shows that there has been a decline of almost 10,000 branches over the past five years, with some evidence in recent quarters that the rate of bank closures has accelerated (a decline of at least 1% of total branches in three of the past four quarters). However, it is important to note more than 82,000 branches remain in operation.

  • According to a Capital One survey, 42% of consumers reported that they missed being able to visit their bank branch during the pandemic.
  • Branches are also crucial to establishing a foothold in new markets. Citizens’ CEO Bruce van Saun claimed at a December 2021 conference that the bank could not target the New York City metro market without the branches it is acquiring from HSBC. JPMorgan Chase has similarly used flagship branches to gain a foothold in expansion markets.

We expect that many of these trends will continue and even intensify in 2022 as both established and emerging players adapt their product offerings, channel strategies and customer experiences to changing customer behaviors and preferences as well as an increasingly dynamic competitive environment.