• Financial technology has already helped level the playing field for smaller banks competing against giants like Wells Fargo and Chase, and AI is being viewed as the next tech arms race for Main Street in keeping up with Wall Street.
• "The teller line, as we see it today, will eventually die," says one community bank CEO, who tells CNBC that the future branch will look more like "a wall of screens."
• JPMorgan CEO Jamie Dimon wrote in his annual letter to shareholders this week that AI will have vast implications for bank worker roles across its more than 300,000 employees.

The pandemic accelerated changes at big banks, where Chase and Wells Fargo already have branches that look more like lounges than banks. But it's not just Wall Street-sized banks where AI is disrupting the way things works.

Small, independent branches are also following, and experts and executives say they'll use their small size and agility to their advantage. The local bank branch, with its traditional teller windows and long lines, will transform into an AI-infused, customer-centric financial services center, aiming to beat the big banks on the service that AI will allow them to provide customers.

"As a small bank, your only value proposition is service. Nothing is proprietary anymore," said Christopher Naghibi, executive vice president and CEO of Irvine, California-based First Foundation Bank, which has 43 branches in five states. With just over $10 billion in assets, Naghibi helped shepherd First Foundation from a single branch in 2007 to its size today.

Naghibi envisions community bank branches with fewer employees and more AI. The employees would be freed to help customers reach their financial goals and not be stuck answering basic questions about recent transactions and account information.

"The teller line, as we see it today, will eventually die," he said.

Naghibi isn't alone among bank CEOs contemplating the AI future for financial workers and customer interactions.

Jamie Dimon, the veteran chairman and CEO of JPMorgan Chase, has written about artificial intelligence in his annual shareholder letters dating back to 2017. But his latest letter, released on Monday, was notable not only for his AI predictions — he wrote it could be as transformational as the printing press, the steam engine, electricity, computing and the internet — but also how he thinks the technology could impact the jobs of the bank's more than 310,000 employees.

"Over time, we anticipate that our use of AI has the potential to augment virtually every job, as well as impact our workforce composition," Dimon wrote. "It may reduce certain job categories or roles, but it may create others as well."

Many of JPMorgan's AI ambitions are taking place behind the scenes rather than at the teller window — it now has more than 2,000 AI and machine learning employees and data scientists working on 400 applications including fraud detection, marketing and risk controls, Dimon said. The bank is also exploring the use of generative AI in software engineering, customer service and ways to boost employee productivity.

For smaller banks, the customer interaction may be the critical application, with AI freeing a bank's resources from answering routine questions..

"This will be at the forefront of how we engage in service," Naghibi said. "You can ask AI, 'Hey, did this happen? Did this check clear? How many payments have I made to this person?' You'll get answers directly from AI."

Customers will be able to go in 24/7 with a special access technology and pay bills by touchscreens, send a wire at midnight, and see transactions updated in real-time. "Effectively, a small bank's branch will be a wall of screens," he said.

Security will improve at transformed branches as paper money becomes less plentiful and more locked into machines. The AI will bring a lot more security to branches also, with plenty of cameras, biometrics used for access, and PIN codes a thing of the past. It will also help in more extreme scenarios. "If someone has a weapon, AI can automatically see that it is a weapon, sense it, and prevent a problem," Naghibi said.

Jackie Verkuyl, chief administrative officer of the eight-branch BAC Community Bank in Stockton, California, a commercial and consumer bank with over $800 million deposits, says implementation of generative AI is already well underway and transforming the small bank. "The AI is getting smarter every day," she said.

But while the corner bank will become an AI-infused financial services center, Verkuyl says generative AI will bring the same services to phones, far beyond the capability of current apps. BAC uses an app called Smart Alac (an acronym for All Access Connection), developed by San Francisco-based Agent IQ, which answers customer questions and matches them with a BAC banker who becomes their assigned point of contact. "This allows community and regional banks to provide self-service AI and have a relationship-based banking experience; every customer has a primary point of contact," said Slaven Bilac, CEO of Agent IQ, a AI-powered customer support platform.

AI distills all the questions that customers are asking Smart Alac and provides a report to Verkuyl, allowing her to tailor the experience more. "We get lots and lots of questions about debit cards, so we created a whole menu that customers can help themselves to," she said.  

"Chase and Wells Fargo's advantage over BAC is the amount of data they have. We can provide AI benefits without large amounts of know-how from BAC's team," Bilac said.

Not everyone in the industry is convinced.

The way a bank controls and shares large amounts of data with AI will be critical to effective transformation, according to Ken Tumin, a senior analyst at LendingTree. Banks have to give AI access to enough data to be effective, from account disclosures to frequently asked questions. "Unless a bank is committed to generating and maintaining high quality and comprehensive data, the use of AI in customer service will likely result in more customers being aggravated than pleased," he said.

The Independent Community Bankers of America, a trade group for small banks, doesn't think AI can outshine the human element in a relationship. While AI will be a significant factor, "it will never match the local knowledge and personal relationships that are crucial to helping a first-time homebuyer get a mortgage or helping a small business or farm finance its operations," said ICBA assistant vice president and regulatory counsel Mickey Marshall.

But bankers like Naghibi believe AI will allow small banks to become more involved in their communities, and in effect, more human.

"Right now, getting branch managers to go out into the community and get business is tough. We are not a large, important bank; people are not going to come to us. You have to go out and build relationships," Naghibi said. "If generative AI is in place, you as a branch manager should be going to get business."

Multiple human and tech-centered connections serve as "touchpoints" to the consumer, Naghibi said, and "the more touchpoints the bank has in their financial lives, the more we can be involved in their lives. As a community bank, that is where the edge is."

"Community banking needs to change; every single one of my clients has my mobile number," he added. "People don't want untouchable and unreachable. Making local bankers more accessible is the promise of AI."