Banking in the Metaverse – The Next Frontier for Financial Services

Banks have long known that if they can capture customers’ attention when they’re young, they’re likely to keep them for life. For this reason, they’ve always been quick to jump on new and emerging trends, and today’s tech hot potato – the Metaverse – is certainly no exception.

Gen Z consumers are entirely digital natives – online is the default option for them when searching for the products and services they need. The metaverse – persistent and immersive digital environments that potentially offer everything we need to live our lives digitally, under one roof – offers new ways for businesses to connect with customers. The banks, as always, were keen to take advantage of this.

If you need a little more information on what the Metaverse is and what it promises for the future, you can check out my Easy Explanation for Everyone article. If not, let’s dive in and look at how banks and other financial services organizations are making their mark there:

Virtual fairs

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 generation of digital native Gen Z consumers, or provide customer service to their customers. 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 features, such as Roblox or Fortnite, can attract millions. Their audiences are digital natives and want to do business with companies that share their understanding and enthusiasm for virtual worlds and game-style environments.

Among those who pioneered virtual storefronts is HSBC, which bought land in The Sandbox earlier this year which it will use to engage with esports fans and esports enthusiasts. . He is CMO for the Asia-Pacific region, said Suresh Balaji: “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 communities. that we serve. Siam Commercial Bank of Thailand also has a virtual branch on The Sandbox platform.

JP Morgan Chase is another global banking giant that has already established a presence by moving to the Decentraland platform. It has created a lounge called Onyx inside the platform’s Metajuku virtual mall, which gives visitors information about blockchain and other technology-focused initiatives the bank is involved in. It also features a tiger and a portrait of the company’s CEO, Jamie Dimon.

However, this trend is not as new as it seems. Linden Labs’ Second Life is often cited as one of the first metaverse environments, having existed since 2003. A few years later, in 2007, Danish investment bank Saxo opened an office on the platform, with many features that today’s metaverse bankers are building, such as the ability to interact and communicate through 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 cash 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 virtual homes. Money can be won in online games like Axie Infinity and Meta Cricket League. This usually involves trading cryptocurrencies and unique digital assets like NFTs. Moving that money into the real world involves exchanging it for real currency, which is paid into a bank account.

The startup Zelf – which calls itself the “bank of the metaverse” – offers regulated services to transfer money between virtual worlds and the real world, as well as to exchange in-game valuables between players.

It’s all about image

Banks and financial services companies have every interest in developing their image as pioneering and tech-savvy high-tech organizations.

With new technologies such as artificial intelligence (AI), automation, virtual reality (VR) and the Internet of Things (IoT) revolutionizing so many aspects of our lives, banks must ensure that ‘they are perceived as being at the cutting edge of technology. One of the reasons for doing so is that they will continue to attract top talent – ​​who otherwise might prefer to turn to tech giants like Google, Facebook or Apple for the most exciting and competitive career opportunities. more lucrative.

Much has been written and said about the skills crisis facing organizations that want to take advantage of the most powerful and potentially world-changing technologies. By ensuring they feature prominently in the metaverse, banks and financial institutions help ensure they are seen as top destinations for the brightest and most skilled graduates and job seekers. – those who 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 physical bank branches closing at an unprecedented rate, it makes sense that financial institutions are turning to metaverse and virtual worlds as a way to maintain connection with customers and provide basic banking services.

It is also clear that virtual economies and trade in virtual goods and services are set to grow. As today’s younger generation of consumers grow up and want to bank and engage with financial services in environments they feel comfortable in, it seems likely that virtual environments will provide them with a familiar platform to do just that.

It’s true that no one knows exactly what the Metaverse is yet, much less what it will look like in five or ten years. However, it’s clear that banking and finance feel it will be an important part of our lives and want to make sure it’s a part of it as well.

To stay up to date with the latest new and emerging business and technology trends, be sure to subscribe to my newsletter, follow me on TwitterLinkedIn 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.

About Emilie Brandow

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