Banking In The Metaverse – The Next Frontier For Financial Services
24 November 2022
Banks have long known that if they can capture the attention of customers when they are young, they are likely to get hold of them for life. For this reason, they have always been quick to jump on new and emerging trends, and today’s hot tech potato – the metaverse – is certainly no exception.
Generation Z consumers are fully digital-native – online is the default option for them when they go looking for the products and services they need. The metaverse – persistent, immersive digital environments that potentially offer everything we need to live our lives digitally, under one roof – provides new ways for businesses to connect with customers. Banks, as ever, have been keen to capitalize on it.
If you need a bit more information on what the metaverse is, and what it promises for the future, you can take a look at my Easy Explanation for Anyone article. Otherwise, let’s dive in and take a look at how banks and other financial services organizations are making their mark there:
One of the most obvious uses of the metaverse, as far as retail banks are concerned, is to create “virtual branches” where they can sell banking products to a new breed of digitally-native gen-z consumers, or provide customer service to their existing customers.
Emerging metaverse platforms like The Sandbox and Decentraland attract hundreds of thousands of visitors each month, while established gaming platforms with metaverse-like functionality, such as Roblox or Fortnite, can attract millions. Their audiences are digital natives and are keen to do business with companies that share their understanding and enthusiasm for virtual worlds and gaming-style environments.
Among those who have been first to set up virtual storefronts is HSBC, which purchased land in The Sandbox earlier this year, which it will use to engage with online sports fans and e-sports enthusiasts. It's CMO for the Asia Pacific region, Suresh Balaji said, "At HSBC, we see great potential to create new experiences through emerging platforms, opening up a world of opportunity for our current and future customers and the communities we serve.” Thailand’s Siam Commercial Bank also has a virtual branch on The Sandbox platform.
JP Morgan Chase is another global banking giant that has already established a presence by setting up shop on the Decentraland platform. It created a lounge area called Onyx inside the platform's Metajuku virtual mall, which gives visitors information about blockchain and other technology-driven initiatives that the bank is taking part in. It also features a tiger and a portrait of the company CEO, Jamie Dimon.
This trend is actually not as new as it seems, however. Linden Labs’ Second Life is often cited as one of the first metaverse environments, having been in existence since 2003. A few years later, in 2007, Danish investment bank Saxo opened an office on the platform, with many of the features that today’s metaverse bankers are building, such as the ability to interact and communicate via avatars.
Bridging the gap between virtual economies and real economies
With spending in the metaverse expected to hit $5 trillion by 2030, it’s big business, and banks are already thinking about the profits that will be made by moving money and perhaps other assets between the digital and physical worlds.
Metaverse platforms allow users to buy virtual goods – including sneakers from Nike and clothes from Gucci – to decorate their avatars and their virtual homes. Money can be earned in online play-to-earn games such as Axie Infinity and the Meta Cricket League. This usually involves dealing in cryptocurrencies and unique digital assets like NFTs. Transferring this money into the real world involves exchanging it for real currencies, which are paid into a bank account.
Startup Zelf – which calls itself the “bank of the metaverse” – offers regulated services for transferring money between virtual worlds and the real world, as well as trading valuable in-game items between players.
It’s all about image
Banks and financial services companies have a vested interest in developing their image as tech-savvy, pioneering high-tech organizations.
With new technologies like artificial intelligence (AI), automation, virtual reality (VR), and internet of things (IoT) revolutionizing so many aspects of our lives, banks have to ensure that they are seen to be on the cutting edge. One of the reasons for doing this is so that they will continue to attract top talent – which otherwise might prefer to look towards technology giants like Google, Facebook, or Apple for the most exciting and lucrative career opportunities.
Much has been written and said about the skills crisis facing organizations that want to leverage the most powerful and potentially world-changing technologies. By making sure they have a prominent place in the metaverse, banks, and financial institutions help to ensure that they are seen as top destinations for the brightest and most skilled graduates and job hunters – those that hold the keys to leveraging the most truly transformative technologies.
The future of banking?
So, is banking in the metaverse just another fad that will die out as consumers lose interest? Well, with actual physical bank branches closing down at an unprecedented rate, it makes sense that financial institutions may well be looking to the metaverse and virtual worlds as a way of maintaining connection with customers and providing basic banking services.
It's also clear that virtual economies, and the trade in virtual goods and services, are set to grow. As today's younger generation of consumers grows up and wants to bank and engage with financial services in environments they feel comfortable in, it seems likely that virtual environments will provide a familiar platform for them to do just that.
It's true that no one really knows exactly what the metaverse is yet, much less what it will look like in five or ten years' time. However, it's clear that banking and finance feel that it will be an important part of our lives and want to make sure they are a part of it, too.
To stay on top of the latest on new and emerging business and tech trends, make sure to subscribe to my newsletter, follow me on Twitter, LinkedIn, and YouTube, and check out my books ‘Tech Trends in Practice’ and ‘Business Trends in Practice, which just won the 2022 Business Book of the Year award.
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