Banking in the Metaverse – The Next Frontier for Financial Services

Banking is one of the industries affected by every wave of digitization. What if the next wave is the use of metaverse technology in banking? Imagine entering a bank branch virtually and interacting with avatars of customer service representatives to help you enter the vault and make a virtual deposit or withdrawal. With banking in the metaverse, these fantastic hypotheses could be real. In this article, we will delve into topics like the business opportunity of banking in the metaverse, the advantages of metaverse banking, and how banks should plan their entry into the metaverse.

The Scope of Banking in the Metaverse

The Metaverse is a virtual environment where people attend business meetings, socialize, travel, etc., from the convenience of their homes. Similar to the actual world, this virtual space can deliver financial services that let consumers buy, sell, or rent assets virtually. Metaverse Banking can be considered an umbrella term for financial operations that enable users to conduct transactions in the Metaverse. It allows banks to reinvent how customers interact with banking while enabling payments, insurance, and loans within the Metaverse.

Traditional Banking vs. Metaverse Banking

The traditional banking system is a two-tier model with the central banks at the head. Banks heavily rely on one-to-one customer interaction. Traditional banking is manual and paper-based, lacking personalization and customization of services. To replace the traditional banking system came the digital banking model. The entire paper-based model is now cloud-based. The entire process is digitized. This model built new customer journeys, and banks operate like tech companies offering improved customer experience and operations.

The growth of the metaverse creates a new virtual setting where people can engage in creative interaction, work, and entertainment. In the metaverse, customers will want financial transactions to be devoid of other physical restrictions even though they will be just as popular as they are in the real world. A financial system is necessary anywhere there is an exchange of value, even in virtual worlds. Banks can leverage the metaverse’s current infrastructure, a scalable medium of exchange, without the involvement of the central bank in the ecosystem. Therefore, they can offer a more personal and immersive experience, and banks can lead in the charge for developing and implementing Metaverse-based virtual banking.

JP Morgan: They have established an Onyx lounge in the Decentraland metaverse where they enable cross-border payments, financial assets creation, storage, and trading.

HSBC: They have invested in a plot at The Sandbox metaverse that will be created for interacting with gamers and esports fans.

Standard Chartered: The financial institution has also purchased a property in The Sandbox, which it intends to utilize for metaverse experimentation and the development of new services for customers.

Siam Commercial Bank: This is the first banking organization to establish a corporate office in The Sandbox. The area is divided into three zones: a) a virtual hub where events and information sharing occur. b) Virtual land: A location where affiliated companies can communicate while working on a project. c) Hub: Through the NFT gallery, NFT marketplace, and virtual performances, it aids in the promotion of regional artists.

Even though these are just a few of the top brands in the metaverse banking industry, as we talk about this transformation, more banks are entering the market. But what do banks gain from funding metaverse initiatives?

Advantages of Banking in the Metaverse

Digital Bank: In the metaverse, you do not have to leave your house for the bank. Moreover, you can use cryptocurrencies and their related financial services too. 

Customer Experience and Employee Experience: Many banks have begun educating their staff on VR, as 47% of bankers believe AR/VR will be a viable alternative to current transaction channels by 2030. For its 50,000 employees, Bank of America has created a VR training program that simulates actual client scenarios. Enabling 3D customer and employee experiences will provide banks access to more advanced solutions that will allow them to reach out to a new target market and build their dominance.

Customer Engagement: Banks can provide personalized services without needing customers to visit their physical locations and engage them in meaningful new ways. Such engagement can offer customers immersive digital banking experiences and expand marketing and branding.

Early Mover Advantage: Banks invested in the metaverse’s potential are establishing their presence on websites like The Sandbox or Decentraland, giving them a competitive edge. As the metaverse is still in its infancy, banks may learn and experiment at a cheaper cost, allowing them to develop novel solutions involving the metaverse at a reasonable price.

Marketing and branding: By engaging customers in new, meaningful ways to enable the expansion of marketing and branding, banks that move to the metaverse increase the value of their brand among customers, especially the younger generation who have a keen interest in digital assets, digital currencies, NFT, etc. This helps to attract young talent with technical skills to build solutions around the metaverse.

Closing Thoughts

Metaverse in fintech is a lot more than a technological shift that would open new sources of revenue. It is a platform that banks can use to reconnect with their customers in a new space and build emotional, personalized engagements with them. Banks today must gear up, especially with some of the world’s leading banks that have already entered the metaverse. It will define their openness toward digitalization. Banks that don’t take the leadership position today may find space in others’ ecosystems.