A decade ago, big banks and thrifts began closing branches in the belief that clicks would replace bricks as customers moved their business online.
But consumers weren't ready, and the experiment was soon abandoned.
Now the old model may finally be changing.
Bank of America Corp., a pioneer in banking online and through mobile phones, said Tuesday that it was considering closing up to 10% of its 6,100 offices across the country, as more customers shift their financial transactions to cyberspace.
The strategy reflects the Charlotte, N.C., bank's success in getting customers to use its online services, an effort that has forced other giants such as Wells Fargo Bank and JPMorgan Chase & Co. to improve their own services, analysts said.
While other banks haven't talked about closing branches, some analysts believe that the industry is approaching a future that will include less real estate and more wireless. While online banking was initially used mostly by younger customers, now it has caught on throughout the population.
Toni Iseman, a 63-year-old Laguna Beach City Council member, uses her Wells Fargo online service to move money among four accounts, pay bills without accidental overdrafts, and quickly tally expenses to enter on her income tax forms.
"I had a car payment that somehow didn't reach Toyota, but it was a snap to prove it had left Wells Fargo," Iseman said.
Among large banks, Bank of America was the first to offer free bill-paying services, and last year the company began allowing customers to chat online with bank representatives 24 hours a day. These services made online banking seem safe to mainstream customers, said Christopher Musto, the head of the competitive research group at Keynote Systems of San Mateo, a mobile and website test and measurement service.
"Bank of America was way out ahead," Musto said. "And now the other banks are catching up."
It is not clear how fast -- or how far -- Bank of America will go to cut branches. The company, which had already begun paring branches in the recession, said this week that it was considering the move but had not decided how many locations would be affected. It has 1,000 branches in California.
It's all part of an effort by the financial giant to cut costs as it adjusts to changes in how customers conduct banking. Use of automated teller machines has risen sharply in recent years along with online banking. And the last year has seen a huge surge in banking from hand-held mobile devices.
"What we are heading to is a model where we have fewer but more robust branches that incorporate the investment and mortgage services that we have picked up with the acquisition of Merrill Lynch and Countrywide," said James Mahoney, a Bank of America spokesman, who said the downsizing might take as long as five years.
There will be less need for branches, he said, because people are accessing their money in new ways and have less need for the traditional neighborhood branch.
The company has 29 million online customers, who conduct more than 3 billion transactions a year.
"We have gone from zero to more than 2.8 million mobile [phone] banking customers in less than two years," he said.
The success is due in part to Bank of America's use of reassuring security techniques, such as e-mails and text messages to alert customers when transactions are made. Wells Fargo, JPMorgan and many other banks also have adopted such measures, soothing customers' fears that identity thefts might go undetected, said Tim Murphy, mobile banking manager at Keynote Systems.
Closing branches would represent a retrenchment for Bank of America, which over the last two decades has expanded aggressively, giving it coast-to-coast reach.
Some analysts said closing branches makes strategic sense considering the pressure Bank of America is under to shore up its financial position as it struggles to absorb its controversial purchases of Countrywide Financial Corp. and Merrill Lynch & Co. It has received $45 billion in federal bailout money, one of the largest amounts among financial firms.
"Bank of America has made a lot of acquisitions, and it is time to figure out where to cut expenses," said Jason O'Donnell, an analyst at Boenning & Scattergood Inc. in Philadelphia. "Eliminating branch overhead and overlap makes sense."
Other banks could soon follow, shutting branches, including redundant ones that they acquired in mergers, O'Donnell said.
At Bank of America, he predicted, branch closures will be heaviest in areas where real estate and operating expenses are highest.
Other analysts said they expected Bank of America and other banks to go slowly at downsizing.
"Bankers are lemmings, and if one does something that gets some traction, eventually they all follow," said Joe Morford, who follows Bank of America for RBC Capital Markets.
He said, though, that he would be surprised by a 10% reduction because branches still serve useful purposes.