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Can the metaverse optimise the banking industry?

The metaverse is of increasing interest to different industries. Victoria Zagorsky, LIBF MENA faculty member, looks at four ways that banks can benefit from the metaverse.

The concept of the metaverse is not new. The term was coined three decades ago by Neal Stephenson. In his science fiction novel Snow Crash, humans, as programmable avatars, interact with each other and software agents in a 3D virtual space.

Launched in 2003, Second Life, an online multi-player world, was an early version of a metaverse. By 2020, Roblox had over 164 million monthly active users, including more than half of all US children under 16.

In 2021, a rise in sales of non-fungible tokens (NFTs) was recorded, while venture capital and private equity funding into the metaverse reached US$13bn. By 2030, the value of metaverse is forecast to reach USD 5 trillion.

Enabling banking in a 3D World

No true metaverse exists now, and it may be hard to envision its final form. Computing power, networking capacity, software protocols and hardware, are not ready yet to support a truly immersive experience.

Internet and smartphones have transformed the way customers bank, and the next frontier for innovation will be unlocked by the metaverse. Today banks need to prepare to embrace the metaverse, and use cases across four areas are expected to deliver the greatest value:

  • Customer experience
  • Employee training
  • Engaging customers
  • Product and service innovation

1. Reinventing customer experience

During the Covid-19 pandemic, banks realised that delivering an optimal digital experience could not replace the human touch.

The metaverse presents a promising opportunity to bring humanity into an experience. It should help banks reconnect with consumers in more authentic, relevant and engaging ways instead of leaving them feeling commoditised.

South Korea’s Kookmin Bank, for example, allows one-on-one consultations between customer and bank staff avatars in its virtual bank. And it provides customers with access to personalised financial information.

2. Enhancing employee training programmes

Building trust with customers requires empathy training. One major financial institution used virtual reality (VR) headsets to enable call-centre staff to ‘travel’ between their virtual desks and a customer’s home.

Looking inside a customer’s home life helped call-centre agents relate to the customer’s needs. This ultimately improved their empathy skills and leading to a 10% improvement in customer satisfaction score.

3. Engaging with customers in new ways

In a digital world, banks have incredible potential to virtualise various interactions, such as branding, event sponsorship, or ATM money withdrawal.   

JPMorgan Chase entered the metaverse by opening a virtual lounge named Onyx Lounge in Decentraland – a 3D virtual world browser-based platform.  

Onyx Lounge enables JPMorgan to operate like a bank in the virtual world, by facilitating: 

  • Cross-border payments 
  • Foreign exchange 
  • Financial assets creation 
  • Trading
  • Safekeeping 

Decentraland launched the first ATM in the metaverse on its platform, Transak. Decentraland can add an ATM to the virtual land for easy access to cryptocurrency, similar to how retailers in the physical world install an ATM to provide shoppers  with easy cash access. 

ATM to the virtual land for easy access to cryptocurrency, similar to how retailers in the physical world install an ATM to provide shoppers with easy cash access.

4. Inventing new products and services

The metaverse offers exciting opportunities to invent new products and services.

The metaverse is in its early stages of development, and there is a debate as to whether it should be built by tech companies. The options were to use either:

  • A centralised Web2 format known as a ‘closed metaverse’
  • A community-owned development method within the Web3 paradigm – an ‘open metaverse’

If an open metaverse materialises, banks may find consumers holding greater share of their wealth in cryptoassets to make metaverse payments or investments.

NFTs can demonstrate the authenticity, ownership and uniqueness of a digital asset, such as:

  • Clothes that users buy for their avatars
  • Tickets to a virtual event in the metaverse
  • A digital art

A high-net-worth customer may want to procure and safely store digital art as an NFT. The role of banks as custodians of customers’ assets will therefore need to be extended to the metaverse to secure, insure and lend against virtual assets.

Many underlying metaverse technologies – that enable a new, more immersive internet experience – are maturing quickly. Banks should focus on the metaverse use cases available today, while investing in capabilities to prepare for the metaverse of the future.

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