The financial technology, or fintech, sector offers enormous growth potential for investors. Just look at Square (NYSE:SQ) stock, which is up over 100% this year. But fintech does not just affect scrappy startups. Traditional, large financial institutions and their stocks, such as Bank of America (NYSE:BAC) and BAC stock, can also be positively influenced by fintech.
Granted, BAC stock hasn’t done much this year. Consider that Bank of America stock has only risen about 3% in 2018, while it offers a dividend yield of only 2%.
But the bank has been investing aggressively in technology, and its advancements in tech could boost BAC stock. For example, BAC recently upgraded its mobile apps, resulting in seamless integration among its banking platform, Merrill Lynch, Merrill Edge and US Trust. In other words, users don’t have to re-enter their passwords when they move among different apps owned by Bank of America.
But the upgrade produced other interesting features, such as:
- Cash flow analysis that provides insights about customers’ income and spending.
- Biometric authentication using a mobile phone.
- The ability to select services by using a shopping cart.
- A new dashboard for the bank’s rewards program.
The Positive Aspects of BAC’s Strategy
Now such things may not seem groundbreaking. But then again, these efforts — which probably did take quite a bit of work — show that Bank of America is paying attention to customers’ needs and trying to create the best experiences possible. That is the kind of approach usually taken by tech companies like Facebook (NASDAQ:FB) and Apple (NASDAQ:AAPL), rather than by a large bank.
Bank of America is also being forward-looking. According to its own research, about three-quarters of millennials believe that all financial decisions will be made with the help of technology in their lifetimes. Actually, that seems like more of an understatement!
Another part of the bank’s tech strategy — which should be encouraging for owners of BAC stock — is its focus on partnerships. Partnering with other companies enables BAC to leverage additional resources and increase its speed-to-market.
An example of the fruits of BAC’s partnerships is the Zelle app, which is operated by a consortium of banks. The app enables person-to-person transactions, similar to those carried out via PayPal (NASDAQ:PYPL).
BAC has aggressively promoted Zelle, and the app has become quite popular. In 2018, more than $25 billion in transactions have been processed through the app.
Bottom Line on the BAC Stock Price
BAC is the second-largest bank in the U.S. Of course, large organizations usually have a tough time innovating because many executives typically have to weigh in on their major decisions. Additionally, because of large organizations’ size, it is difficult for them to revamp their existing systems.
But Bank of America, whose mobile apps have close to 26 million users, has shown that it can overcome these challenges.
True, it will take time for these initiatives to move the needle. But for investors who are considering buying a bank stock, BAC stock does look attractive because of its efforts to implement new technologies.
And besides, Bank of America stock is very cheap right now, as the forward price-earnings multiple of BAC stock is only about ten. In other words, as the bank’s investments in tech help enable its growth to accelerate, BAC stock should rise above its current levels.