The pandemic has accelerated changes at big banks, where Chase and Wells Fargo already have branches that look more like living rooms than banks. But AI isn’t just disrupting the way banks the size of Wall Street operate.
Smaller, independent branches are also following suit, and experts and executives say they will use their small size and agility to their advantage. The local bank branch, with its traditional tellers and long queues, will transform into an AI-driven, customer-centric financial services center, aiming to beat the big banks on the service they offer. AI will enable them to deliver to their 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, Calif.-based First Foundation Bank, which has 43 branches in five states. With just over $10 billion in assets, Naghibi helped First Foundation grow from a single branch in 2007 to its current size.
Naghibi envisions community bank branches with fewer employees and more AI. Employees would be free to help customers achieve their financial goals and would no longer be required to answer basic questions about recent transactions and account information.
“The ATM, as we see it today, will eventually disappear,” he said.
Naghibi is not alone among bank CEOs in considering the future of AI for financial workers and customer interactions.
Jamie Dimon, veteran CEO of JPMorgan Chasehas written about artificial intelligence in his annual letters to shareholders dating back to 2017. But his latest letter, published Monday, wasn’t just notable for its predictions about AI — he wrote that it could be as transformational as the printing press, the steam engine, electricity, computing and the Internet – but also the impact he believes technology could have on the employment of the bank’s more than 310,000 employees.
“Over time, we anticipate that our use of AI will have the potential to increase virtually all jobs and impact the composition of our workforce,” Dimon wrote. “It may reduce some job categories or roles, but it may also create others.”
Many of JPMorgan’s AI ambitions are happening behind the scenes rather than at the front desk: the company now has more than 2,000 AI and machine learning employees and data scientists working on 400 applications, including data detection. fraud, marketing and risk control, Dimon said. The bank is also exploring the use of generative AI in software engineering, customer service and ways to increase employee productivity.
For smaller banks, 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 did I make to this person?’ You’ll get answers directly from the AI.”
Customers will be able to visit 24/7 using special access technology, pay bills via touch screens, send a telegram at midnight and see transactions updated in real time. “Essentially, a small bank’s branch will be a wall of screens,” he said.
Security will improve at converted branches as paper money becomes less abundant and more locked in machines. AI will also bring much more security to branches, with many cameras, biometrics used for access and PINs becoming a thing of the past. This will also be useful in more extreme scenarios. “If someone has a weapon, the AI can automatically see that it is a weapon, detect it and prevent a problem,” Naghibi said.
Jackie Verkuyl, chief administrative officer of eight-branch BAC Community Bank in Stockton, Calif., a commercial and consumer bank with more than $800 million in deposits, says implementing generative AI is already well underway advanced and transformed the small bank. “AI is getting smarter every day,” she said.
But as the corner bank becomes an AI-infused financial services hub, Verkuyl says generative AI will bring the same services to phones, far beyond the capabilities 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 customers’ questions and connects them with a BAC banker who becomes their designated point of contact. “This enables community and regional banks to provide self-service AI and a relationship-based banking experience; every customer has a primary point of contact,” said Slaven Bilac, CEO of Agent IQ, an AI-powered customer support platform.
The AI distills all the questions customers ask Smart Alac and provides a report to Verkuyl, allowing it to further tailor the experience. “We get a lot of questions about debit cards, so we created a whole menu that customers can help themselves to,” she said.
“The advantage Chase and Wells Fargo have over BAC is in the amount of data they have. We can provide AI benefits without a lot of know-how from the BAC team,” Bilac said.
Not everyone in the industry is convinced.
How a bank controls and shares large amounts of data with AI will be critical to effective transformation, according to Ken Tumin, principal analyst at LendingTree. Banks need 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 comprehensive, high-quality data, using AI in customer service will likely irritate more customers than satisfy them” , did he declare.
The Independent Community Banking Association, a trade group for small banks, doesn’t think AI can overshadow the human element in a relationship. While AI will be an important factor, “it will never match the local knowledge and personal connections that are essential to helping a first-time buyer secure a mortgage or helping a small business or farm finance its operations,” said the ICBA assistant vice president and director. Regulatory Advisor Mickey Marshall.
But bankers like Naghibi believe AI will allow small banks to become more involved in their communities and, in fact, become more human.
“Right now it’s difficult to get branch managers to go out into the community and do business. We’re not a big, important bank; people won’t come to us. We need to going out and building relationships,” Naghibi said. “If generative AI is in place, you as a branch manager should win business.”
Multiple human and technological connections serve as “touch points” with the consumer, Naghibi said, and “the more touch points the bank has in their financial lives, the more involved we can be in their lives. As a community bank, that’s where the edge is.”
“Community banking needs to change; every one of my customers has my cell number,” he added. “People don’t want to be untouchable and inaccessible. Making local bankers more accessible is the promise of AI.”
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