Bank in the Metaverse
By Rajashekara V. Maiya, Vice President, Global Head of Business Consulting, Infosys Finacle
Although still in their infancy, the gaming, media, and entertainment industries have already begun to branch out into the metaverse. However, the heavily regulated and data-intensive banking industry has lagged with the adoption of this new platform. But now banks are also trying to tap into the huge potential that the metaverse can offer them.
Although the banking industry came a bit late in the metaverse, it has the opportunity to take the lead, as digital interactions and the adoption of digital fintech solutions have increased massively since the pandemic. The Gartner report on the digital transformation of financial organizations echoed this with nearly 70% of business leaders stating that digitization initiatives are accelerating, and further expecting the industry in which their businesses operate to be “transformed.” dramatically” by 2026. It will be worth it. also, as recently JPMorgan report estimated that market and business opportunities for Metaverse companies will represent over $1 trillion in annual revenue.
Some banks have already started to join the new online community. JP Morgan opened a virtual living room in Decentraland, a 3D virtual world browser-based metaverse platform. In Asia, South Korea’s largest financial institutions, KB Kookmin Bank, are working on the metaverse KB VR Branch Testbed, which will allow customers to access financial services in the metaverse, while also being used for training purposes. and education. HSBC also announced its foray into the metaverse earlier this year with its partnership with The Sandbox to “create innovative brand experiences for new and existing customers.”
This new banking model has advantages not only for them, but also for their customers. Retailers can sell goods in the banking metaverse, such as cars, clothes, furniture, and even houses. It would also allow customers to access “buy now, pay later” insurance plans to help them manage their finances. Activities like this taking place in the metaverse are set to become the norm in the not-too-distant future, as Gartner predicts that by 2026, 25% of people will spend an hour of their day in the metaverse engaging in activities such as shopping, work, and education.
Banks could also use the metaverse to improve their customer engagement, which will ultimately lead to better customer attraction and retention. With non-digital interactions having long been in decline across the industry, detailed by PwC, metaverse technology can offer a valid alternative with immersive experiences such as virtual training and development centers, which will allow banking staff to build relationships with customers to solve real banking problems. While not only being a new and unique experience for the customer, it will also provide them with the convenience of not having to travel to their bank branch to sort out their financial issues and queries.
The metaverse could also be an opportunity for traditional traditional banks to compete with their challenger competitors and catch up on innovations. Making the most of the higher degree of trust they already have compared to neobanks like reported by EY, this may be related to the way transactions are carried out on this new platform. They will obviously need to be secure, and banks will benefit if they are able to develop and implement solutions that will meet these transaction and investment needs.
However, a secure system will have to be put in place for these transactions. Blockchain seems to be the answer to this, as it will allow individuals to have rights over their own data and will involve fewer intermediaries, thus reducing the cost of each transaction. The implementation of the blockchain here seems all the more likely to become a reality that according to insights from Deloittethe banking industry is leading blockchain adoption, with global spending on the technology also expected to grow from US$5.3 billion in 2021 to US$34 billion in 2026.
Banks are only beginning to understand what the metaverse can do for them. From new ways to engage customers with new and exciting methods of engagement to financial services that will give them more choice and convenience. However, it will take a lot of time and effort on the part of banks to be able to become a player in the metaverse. This will require a monumental transformation not just of their legacy technologies, but of their entire marketing strategies and business models.