Last week I joined the Massachusetts Bankers Association to discuss the future of community banking and the future of finance.

Some of the oldest institutions in the United States today are members of this storied association. Eastern Bank was established in 1818 as Salem Savings Bank, Dedham Institution for Savings was started in 1831, and Cambridge Savings Bank was founded in 1854. BankFive, chartered in 1855 as the Fall River Five Cents Savings Bank, is one of the first Five Cent Savings Banks in America.

Community banks were one of the many unsung heroes of the pandemic. They helped small businesses secure life-saving PPP loans. They supported first-time home buyers finance purchases. They helped commercial real estate owners hard hit by lockdown orders.

Community banks are the bedrock of their communities. Nationally there are about 4,200 community banks today. These banks account for roughly 40% of all bank branches, 14% of bank deposits, 18% of bank loans, and just over 13% of bank assets. The remaining deposits, loans, and assets are held by non-community banks, of which there are roughly 127. Despite only holding 18% of total industry loans, community banks hold over one-in-three small business loans.

Similar to other industries, the pandemic accelerated an often-overdue digital transformation for many banks. For many community banks, new customers could not open an account online until COVID changed how they operated and interacted with customers. You could not talk to your banker remotely until the pandemic necessitated zoom-esque video meetings. You could not sign loan documents or perform other essential operations without coming into a branch. Banks, like many businesses across a wide swath of industries, are still figuring out new ways of operating in our post-pandemic world.

Community banks face significant challenges today. The upgrade of digital solutions has reduced traffic at branches, calling into question what to do with these core assets. Community banks face pressure from neobanks and other fintech upstarts that are bifurcating financial services. They face competition from large companies like Amazon, Apple, and Walmart who are looking to expand beyond their existing industry footprints. They face regulatory burdens not borne by other financial institution competitors. They face the challenge of generational shifts and changing consumer preferences.

In my keynote, I talked about the mindset needed to lead a community bank on the pathway towards the 22nd century. Banks need to introduce new products to new markets in order to thrive. This has often meant finding new customers for existing products they already offer. Adding more checking accounts. Producing more loans. But their future will be more than just broadening their base or expanding existing products. I believe the future will mean a new age of innovation that introduces entirely new products.

Much of the innovation we have seen from fintech has been the result of entrepreneurs and innovators crafting new solutions for problems that have long existed. Venmo helped us figure out how to easily split the cost of a meal when the bill arrived at the table. We are seeing new innovations in alternative credit scoring, immediate access to earned wages, digital wallets, small-ticket loans, cold wallets, conditional cash transfer programs, alternative insurance underwriting, crypto and blockchain, payment gateways, and much more.

How will banks find these new products and services? I talked about how their individual digital transformations will lead to massive data exhaust and it is in this data exhaust that they will find many of the solutions needed to thrive in the years to come. They will find new products to offer and new ways to serve their existing customers.

Here is just one example I shared with them. Today we onboard bank customers by forcing them to pick an account plan before they do anything else. You often cannot become a customer of a bank without opting into a specific plan. But many tech companies onboard customers in a very different way. They do not make us decide how we want to use the platform before we have even had a chance to use the service being offered. Instead, they bring us on board, let us try things out, and then let us decide what type of customer we want to be based on how we use the technology. Imagine if banks onboarded customers in the quickest, easiest way possible, and then let the user’s behavior tell us what type of customer they are or what type of account they should have. Imagine if we let the data exhaust tell us how to think about them as a customer only after we have made them a customer.

I also talked about how tech is changing our relationship with capital. For example, what if autonomous vehicles were to become the bank branch of the future – showing up in different neighborhoods throughout the week just like your favorite food truck does today. We think about capital as a fixed resource, but in the future, it does not have to be. Likewise, autonomous vehicles do not have to play the same narrow role traditional vehicles play in moving people between two points. They can morph into a myriad of forms that impact a tremendous number of industries.

Many banks are embracing innovation. They are partnering with fintech companies. They are replacing ATMs with ITMs (interactive teller machines). This is extending branch hours and helping customers to perform even more tasks digitally. Banks like JP Morgan and Standard Chartered have started opening branches in the metaverse. Crypto has also moved front and center for many community banks that plan to offer capabilities in the coming years.

Community banks, like many businesses, are tech companies now. They are software companies. They are data-consuming AI companies. And technology will help them bridge their rich history with their bright future.

By now you are probably familiar with non-fungible tokens (NFTs) and the many ways in which creators are using them to generate value. While NFTs are being increasingly used by artists and musicians, they can also be used strategically by offline businesses.  

Here are three ways NFTs could augment your customer engagement strategies.

1.       NFTs Create Communities

Organizations are using NFTs to provide access to private Discord groups, VIP fan experiences, exclusive meet-and-greets, and special merchandise all with the aim of developing devoted fan communities. Miami super club E11EVEN plans to host private in-person get-togethers for holders of its Captain Club NFTs. A new movie production company is even using NFTs to create a community of super fans who will be able to provide feedback on content produced by the studio.  

2.       NFTs Grant Exclusive Access

A number of brands are offering limited edition items and exclusive access only available to NFTs holders. Think of NFTs as the next member’s only initiative. Digital fashion brand Cult&Rain’s first NFT can be redeemed for an identical pair of luxury sneakers. Gary Vee’s VeeFriends NFTs grant access to its VeeCon conference for each of the next three years. And Buffalo Trace Distillery minted NFTs that correspond to a limited release of its O.F.C. Bourbon Whiskey, distilled in 1982. The holders of the NFT can redeem for a physical bottle of the bourbon and when they do so they also unlock a private VIP tour experience at the distillery.   

3.       NFTs Can Pay “Dividends” that Reinforce Engagement

NFTs can create value into perpetuity. If you buy a collectible in the physical world, the value of that item changes as the tastes and preferences of potential buyers change. But the underlying item does not change. With digital assets like NFTs, the original creator can assign additional value or utility to the NFTs they have created. In this way, you can use NFTs to pay “dividends” to your biggest fans. For example, the Gift Goat token is one of the NFTs created by VeeFriends. The NFT provides admission to the VeeCon conference in 2022, 2023, and 2024, but it also includes a series of physical gifts that are mailed to token holders.

While NFTs have initially occupied the digital world, they are increasingly influencing what takes place offline. Executives should start to take note.

Man U recently announced it is partnering with Sony to build the first professional football stadium in the metaverse. The Atlanta Braves became the first MLB team to announce it was also joining the metaverse. A plethora of interesting consumer-facing opportunities including ultimately bypassing traditional media distribution networks to deliver live matches, game highlights, and other content directly to the fanbase. Remember, the metaverse won’t be exclusively accessible through VR, but will also be accessible through other devices like laptops and smartphones.

In the process of digital mapping, their stadium experiences to develop the virtual reality replica appearing in the metaverse, Man U and the Atlanta Braves are creating a digital twin which opens up other opportunities for their respective organizations. There is tremendous focus on the consumer-facing applications of the metaverse, but in the process of building out the metaverse, organizations are creating digital twins of their physical assets. The enterprise applications could far surpass the consumer-facing ones.

A basic tenet of economics suggests that when the supply of labor shifts down or the demand for labor shifts up, it creates a shortage of workers at the current wage rate. If this imbalance persists, eventually wages rise, attracting workers into the workforce, resulting in a new equilibrium level of employment with a corresponding higher wage.

While wages have been rising, and are expected to continue to rise in 2022, worker shortages remain. Company executives often tell me they can’t seem to recruit workers even when offering higher wages. There are a lot of theories about why higher wages are not seemingly working to attract desperately needed workers.

The fear of COVID exposure likely kept some workers out of the labor force, at least early in the pandemic. Many executives have felt that strong unemployment benefits in the wake of the pandemic lowered the desire, and perhaps the necessity, to work. In the U.S. we have seen a sharp drop in the number of daycare workers, which has likely led to a reduction in childcare services and is keeping some workers out of the labor force. Some workers might be unwilling to return to the office for other reasons.

New research from Julie Hotchkiss suggests that higher wages may not be enough to sufficiently attract certain segments of the labor force. From her paper:

“labor supply decisions of both Generation X (those born from 1965 to 1980) and the millennial generation (born from 1981 to 1996) are less responsive to wage increases than decisions made by baby boomers at the same age…compared to baby boomers, millennials’ labor force participation decisions are only about three-quarters as responsive to wage changes and participation decisions by members of Generation X are only about half as responsive.

So what does this mean for employers? You will likely need to more aggressively offer non-monetary benefits and incentives. This is especially true for jobs requiring less education. You likely can’t avoid offering higher wages, but you also need to sweeten your offers with greater nonwage incentives to attract and retain the workers you need.

BMW owners are now able to get real-time video support from certified technicians through interactive video calls. The service is being powered by startup Blitzz.

Here’s a description from a recent release:

Instead of downloading an app, BMW Genius or Roadside Assistance customers can get a support link via text and be immediately connected with the representatives supporting their case via their smartphone. BMW representatives then work with customers to visually assess questions or issues with the car and walk drivers through how to use features in their vehicle or address any problems – all through an interactive video call.

For sometime now we have seen the camera play an increasingly central role in how we interact with the internet. Google lens lets users translate or copy text, search via images, and even get help with homework problems from the smartphone camera. Apple has its Live Text feature which lets users copy text using the camera and app developers can use the feature to help users autofill digital text from physical items.

Is video chat the ultimate concierge service?

Most people do not read product manuals, at least not in the U.S. Perhaps more companies will begin offering live product tutorials and support via live person video chat.

A new study published in the Proceedings of the National Academy of Sciences finds AI-synthesized faces are indistinguishable from real faces and humans actually find them slightly more trustworthy. The results highlight not only the risks of deepfakes, but also a tremendous opportunity for researchers and businesses.

The study looked at three experiments. In the first experiment, 315 participants classified 128 faces taken from a set of 800 as either real or synthesized. Their accuracy rate was 48%, no better than a 50-50 guess.

In a second experiment, 219 new participants were trained on ways to identify deepfakes and given feedback on how to classify faces. This group classified 128 faces taken from the same set of 800 faces – but despite training, the accuracy rate improved to only 59%.

Finally, a third group of 223 participants rated a selection of 128 of the images for trustworthiness on a scale of one (very untrustworthy) to seven (very trustworthy). This group rated synthetic faces a slightly higher average of 4.82, compared with 4.48 for real people.“We found that not only are synthetic faces highly realistic, they are deemed more trustworthy than real faces,” says study co-author Hany Farid, a professor at the University of California, Berkeley.

The results make clear that humans intuition and discernment alone will not be able to effectively combat deepfakes. Researchers should be proactively focused on countermeasures and other tools and techniques that can help detect deepfakes.

While the results suggest deepfakes can be highly effective when used for nefarious purposes, it also highlights the effectiveness to which marketers can use AI-synthesized faces and tools in promoting their services and products. The fact that humans find AI-synthesized to be more trustworthy than photos of actual humans suggests marketers might be able to leverage this attribute to form a stronger bond between consumers and their marketing message. Already, companies like LG are using synthetic humans to promote their products. The study results also highlights the potential role AI-synthesized humans might play in the metaverse.

ast week, I was at the Car Wash Show in Las Vegas speaking about the connected consumer and what it means for the future of the car wash industry. And like so many of the industries I work with, there are massive changes coming their way. Here are some of things I shared about how the next shift in technology is transforming this age-old business.

The car wash industry is a highly fragmented marketplace, but that is set to change as the industry undergoes the next leg in its digital transformation. The fragmented nature is likely one of the reasons the industry has been slow to adopt certain technologies compared to other industry segments but that is changing rapidly. Technology adoption is transforming the front-facing consumer experience and the back-of-the-house operations. Some of these changes are changing the nature of the business, for example, by fostering unlimited wash subscription services, one of the largest areas of growth for the industry. But this is just the start. Consumer facing technologies like license plate readers and digital kiosks will enable a new level of customization, especially important in an environment where labor is hard to find. Technologies like Lidar, used by autonomous vehicles to create 3D maps of their physical environments, are being used to provide greater precision car washes and in the process use less water and few chemicals.

The next big step for the car wash industry is to connect the front-of-the-house with the back-of-the-house. That means connecting CRMs systems with digital kiosks so businesses can deliver a personalized experience at scale. It means gleaning insights from the data exhaust of increasing digitized and connected equipment. And it means using that data to make better informed decisions about things like promotions and staffing.

Of course, these are just some of the changes underway and many are coming to other industries, but I’m excited to see how the car wash industry is beginning to use technology and data to transform and grow.

Some recent research suggests groups working remotely can be just as effective as groups working in-person. So what does influence a group’s ability to work effectively together on a range of tasks? The research finds that how the work is done and who is doing it both appear to be strong predictors of collective intelligence in a group.

For instance, the largest predictor of collective intelligence is a group’s collaboration process. More specifically, two aspects of how groups coordinate their efforts are important: first, that they figure out which member is the best at different tasks and have that person take the lead on it; and, second, that members coordinate their efforts so that they cover all of the different tasks and don’t leave things unfinished. Our analyses show that coordinating members’ skills and covering all of the tasks are just as important for remote teams as they are for face-to-face teams, and collectively intelligent teams are able to coordinate in these ways regardless of where they are working.

In addition, we observed that who is doing the work has a significant influence on a group’s collective intelligence — not only whether they had skills relevant to the tasks, but also their social skills, especially their social perceptiveness. Groups whose members are more socially perceptive pick up on all kinds of subtle nonverbal cues, and we observed that they are also able to coordinate more effectively in the ways we have described — even when working remotely.

Remote teams have better tools at their disposal than ever before. But does your organization have the right processes in place? This is the question you should be exploring.

Last week I keynoted the second annual Asset Management Seminar by BKD CPAs & Advisors. It was a phenomenal night with a sell-out crowd attending in-person and several hundred more registered for the simultaneous virtual event online.

BKD’s CEO Tom Watson kicked things off by sharing a glimpse into BKD’s nearly 100 years of history and how they have built up a leading global #assetmanagement practice in just the last few years.

In my remarks, I shared my outlook for the global economy. I discussed risks on the horizon, including the myriad supply chain challenges we are confronting right now and what it means for diverse industries over the next year.

I also shared my thoughts on several big trends confronting the #investment profession, including major demographic changes that could have a significant impact on wealth distribution, risk appetite, and the future of #philanthropy. I also discussed the changing role of government, the changing nature of going public, and how #ESG is redefining every organization.

I closed with a look into the future. The world is shifting from #digitization to #datafication and this has massive implications for the investment profession. Not just for the art and science of asset management, but also for what it means for the businesses that we invest in.

Following my remarks, BKD hosted two great panel discussions. The first was a conversation with #fundmanagers moderated by BKD’s Kislay (Sal) Shah, CPA. I really appreciated the transparency of the conversation and an honest look into the challenges they are confronting in a #COVID economy.

The final session covered some of the biggest topics in asset management with some of BKD’s leading authorities (Brian Matlock, BKD Partner, Debbie Scanlon, Murat Yasanliel, CPA, MST, Stephanie Rocco, CPA, Paul Russell, CPA, Howard Hong, CPA, and Jim Jordon) on topics like the future of #LIBOR (or a future without LIBOR), ESG, #SPACs, and #DEI.

Thoroughly impressed with BKD’s entire team of #TrustedAdvisors!

#future #event #economy #supplychain