Metaverse Finance: Shaping the Future of Banking and Beyond
The metaverse isn't just a trendy term – it's a groundbreaking frontier that's poised to transform our economy. Tech evolution synergized with other advancements is driving this shift, predicted to reach a whopping $800 billion metaverse market by 2024. The implications are vast, including the associated NFT market at $41 billion and $54 billion spent on virtual goods in 2021 [1][2]. Soon, the metaverse will be the digital habitat for countless individuals, necessitating strategic investments to engage with customers.
So, why should the banking sector care about the metaverse? The simple answer: it's a colossal market opportunity. Expected to generate $800 billion in annual revenue by 2024, the metaverse is a new realm where customer engagement, product innovation, and efficiency take on new dimensions.
But it's not just about revenue. The metaverse can revolutionize how banks interact with customers, devise inventive products, enhance services, and fortify security.
The metaverse doesn't spare banks from change. It's not just about adapting to a new way of doing business. It's about reshaping how customers and employees engage with banking services, while presenting new prospects and challenges related to financial inclusion, innovation, and regulation. In this blog post, let's delve into how several banks are embracing the metaverse and leveraging its immense potential.
Reinventing Banking in the 3D Realm
Virtual banking isn't just about transactions – it's about immersive, personalized access to financial products. Picture this: virtual bank branches where loans, insurance, and investment products are showcased. In this metaverse, banks offer customer support through avatars, chatbots, or VR/AR devices. This approach elevates convenience, customization, and even adds an element of gamification to enhance customer loyalty.
The metaverse also empowers banks to enhance their existing services in 3D. Think account opening, transactions, customer support, and financial education – all in an immersive digital space. This elevates engagement, satisfaction, and efficiency while cutting operational costs.
And the examples are promising. BNP Paribas' VR app lets customers conduct transactions in a virtual environment, even opening accounts [3]. Citi tests holographic workstations for financial trading. Bank of America employs VR training for employees, simulating real customer interactions to fine-tune their skills [4].
Forging Innovative Banking Avenues
The metaverse isn't just about adapting – it's about innovation. Banks can create tailored products and services for metaverse users. Imagine digital wallets, NFT marketplaces, crypto custody, virtual real estate financing, and metaverse insurance – all designed to fit the metaverse user's unique needs.
In the metaverse, users buy, sell, and trade virtual goods with ease. Effective virtual transactions demand secure, efficient payment systems, handling various currencies including fiat, crypto, and in-game tokens. Banks, with their expertise, can provide these services, facilitating virtual transactions through wallets, exchanges, escrow, and gateways. HSBC, for example, partners with The Sandbox to sponsor e-sports events and offer services to users [5].
Igniting Innovation and Inclusion
Banks can leverage the metaverse for innovation and inclusion. It's a space to experiment with fresh business models, forge partnerships, and target new customer segments. Moreover, it's an avenue to reach underserved populations, fostering financial literacy and empowerment.
For instance, JPMorgan has already established a presence in the metaverse by opening a lounge in Decentraland, a virtual world based on blockchain technology. The bank’s lounge allows users to purchase virtual plots of land using non-fungible tokens (NFTs) or cryptocurrency [6]. Similarly, KB Kookmin Bank is developing the KB Metaverse VR Branch Testbed, which will enable customers to access banking services in the metaverse through a head-mounted VR device. This includes virtual banking services, transactions, and one-on-one consultations between customers and employee avatars [6].
Amplifying Data Insights
In the metaverse, data is gold. Banks can leverage it to enhance their services. By gathering rich data from metaverse interactions, they can personalize products, improve offerings, and identify untapped prospects. Blockchain technology ensures data security, guarding user information in the metaverse.
Virtual identities in the metaverse secure users' reputations and data across platforms. Banks play a vital role in providing digital identity solutions, offering secure, interoperable user identities. Banks can then use these digital identities to tailor services based on metaverse users' behavior and preferences. Mastercard's digital identity service showcases this concept, using biometrics and blockchain for secure online identification.
The Future Beckons
The metaverse isn't just on the horizon – it's here. Banking's next phase involves embracing this new reality, utilizing it to elevate customer experience, foster innovation, and champion inclusion. The instances we've highlighted are just the start. Countless opportunities await those ready to explore the metaverse's vast potential.
Notes and References
- Sudhir Pai (2022). Banking On The Metaverse. Forbes. https://www.forbes.com/sites/forbestechcouncil/2022/03/15/banking-on-the-metaverse/
- GlobalData (2023). Metaverse in Banking - Thematic Intelligence. https://www.globaldata.com/store/report/metaverse-in-banking-theme-analysis/
- Economic Times (2021). Metaverse: The real impact on banking and fintech industry. https://economictimes.indiatimes.com/markets/cryptocurrency/metaverse-the-real-impact-on-banking-and-fintech-industry/articleshow/95604401.cms
- Abbott, M. (2022). Banking in the metaverse: The next frontier. Accenture Banking Blog. https://bankingblog.accenture.com/banking-in-the-metaverse-the-next-frontier
- Bernard Marr (2022). Banking In The Metaverse – The Next Frontier For Financial Services. Forbes. https://www.forbes.com/sites/bernardmarr/2022/11/16/banking-in-the-metaverse--the-next-frontier-for-financial-services/
- Information Age. (2023). How the metaverse can transform banking. Information Age. https://www.information-age.com/how-metaverse-can-transform-banking-19881/
- Blakey, D. (2023, January 16). The Metaverse: what does it mean for banks? Retail Banker International. https://www.retailbankerinternational.com/comment/peter-mcconville-synechron-expert-comment-banking-in-the-metaverse/#:~:text=Banks%20have%20the%20opportunity%20to,representatives%20for%20help%20and%20advice
- Finextra. (2022). Banking in the metaverse: perspectives on opportunities and realization. Finextra Research. https://www.finextra.com/blogposting/23342/banking-in-the-metaverse-perspectives-on-opportunities-and-realization
- AppSierra (2023). What is Metaverse in Finance Sector and Its Impact on Banking. https://www.appsierra.com/blog/metaverse-in-finance-sector
