You don’t need to be a science-fiction fan to believe in the metaverse. It’s here, it’s real and there’s still time for banks to jump on the bandwagon.
The metaverse is a vision, not just a technology. It’s a virtual world with a diverse ecosystem and a thriving culture. More importantly, the metaverse runs on exchanging goods and services, and the financial infrastructure is still being built. That’s why banks need to pay attention to this opportunity.
As you explore the metaverse and all it has to offer (as well as what your institution can provide in return), keep these five things in mind.
The metaverse is fragmented, but not for long: The universe may encompass all things, but the metaverse is less comprehensive — comprising a handful of disjointed virtual worlds. They’re run by different companies, operate on different systems and cater to different target audiences. You’re likely familiar with the largest operators, including Meta (formerly Facebook), Microsoft and Apple. But banks should also familiarize themselves with budding metaverses like Decentraland and the Sandbox.
Currently, most worlds are closed because identities, payments and assets don’t transfer between platforms. However, a unified metaverse is in everyone’s best interest, and banks can help facilitate financial interoperability.
The metaverse is an opportunity to expand products and services: Part of the metaverse’s allure is the robust opportunity for commerce. Digital assets and services are still in the early stages of development, but we’re already seeing markets for art and collectibles.
Users need safe, accessible payment and asset-storing forms in the metaverse. Banks are well-positioned in this space already — proactive institutions can establish a footing by offering products like virtual wallets, which allow users to transfer assets to and from the real world and between virtual ones.
Banks can bolster their customer experiences: Financial institutions have poured billions of dollars into digital and mobile capabilities. Online banking is more convenient than traditional in-branch methods, except it’s missing a core component of service: personal interaction. One-to-one connectivity is critical to building trust and brand loyalty, which ultimately drives customer lifetime value.
The metaverse enables banks to offer many of the same capabilities in an immersive, human-centric format. For instance, a large financial institution in South Korea recently launched a virtual bank that allows customers to manage their finances in a virtual-reality setting, including consulting with a bank employee “face-to-face.”
The early mover advantage is fading — but still alive: In terms of widespread adoption, virtual reality is in its infancy, but this hasn’t stopped major financial players from entering the arena.
In 2021, Bank of America announced VR training for employees, specifically for complex tasks like navigating difficult client conversations. Earlier this year, JPMorgan Chase and HSBC began their forays into the metaverse. The former opened the Onyx Lounge in Decentraland, while the latter purchased land in the Sandbox.
There’s already a rush to gain market share in the metaverse. Start by monitoring growth rates and competitor progress, and then incrementally establishing your brand’s presence in these markets.
Virtual land opens the door to virtual mortgages: Lending is critical to many asset marketplaces, most notably real estate. That holds true in the metaverse, even if it’s not technically “real.”
Yes, you can buy property in the metaverse — in fact, virtual land is rapidly appreciating. Several platforms programmed scarcity into their worlds, setting geographical parameters to limit supply and involving celebrities and major brands to drive demand. In the Sandbox metaverse, one spirited buyer doled out $450,000 for the property next to rapper Snoop Dogg. Perusing the Decentraland marketplace, it doesn’t take long to spot seven-figure listings.
Although it’s easier for fintechs and crypto firms to move early, banks have a significant leg up in issuing credit and underwriting loans. As the metaverse expands, so will the opportunity for lending.
Emerging technology is always exciting, but it also introduces risk and uncertainty. The metaverse is no exception, so it’s prudent to evaluate potential investments and roles in the metaverse with a healthy dose of caution. That said, the opportunity to help create a brand-new financial experience awaits.
Neil Dougherty is vice president, marketing and communications, at Strategic Resource Management.