According to a survey, 47% of bankers believe that customers will use augmented reality (AR)/virtual reality (VR) as one of the prime alternative channels for transactions by the year 2030.
This draws our attention to the importance of the metaverse in the banking industry. Well, we need to understand that the concept of the metaverse has not only remained limited to the realms of science fiction or gaming. It is extending its reach into the world of banking, ushering in a new era of next-generation financial services.
This shift towards the use of metaverse technology in banking holds the potential to reshape the very foundations of financial institutions. It offers unprecedented opportunities and challenges.
Moreover, the integration of blockchain technology, decentralized finance (DeFi), non-fungible tokens (NFTs), and virtual reality (VR) experiences into the banking ecosystem is all set to create a dynamic landscape. A landscape where traditional brick-and-mortar institutions will be forced to adapt or risk becoming obsolete.
Well, if you are planning to invest in this technology, this blog is for you. It will let you delve into the various dimensions of the metaverse in banking, exploring its impact on customer experiences, financial inclusion, security, and the broader financial ecosystem.
So let's begin the journey!
The finance metaverse market is projected to expand at a compound annual growth rate (CAGR) of 21.33% from 2022 to 2027. It is anticipated that the market will grow and reach 107.06 billion USD by 2027. The market’s expansion is contingent upon multiple variables, including the incorporation of VR and AR platforms, the advent of artificial intelligence (AI), and the growing acceptance and appeal of cryptocurrencies.
Infosys also carried out a survey in which information was gathered from 111 banking professionals in North America. Participants ranged from management and operational levels to senior-level executives and the C-suite. The US makes up 70% of the surveyed enterprises, with the remaining 25% being located in Canada and Mexico.
The combined assets of all the surveyed companies exceed 5 billion USD. This poll was conducted with the intention to find out how regional banks in the financial services sector felt about the metaverse and to find out where, when, and how businesses intended to invest in it.
Here are the results of the survey.
The Metaverse plays a pivotal role in the banking sector. If we go with the traditional system, banknotes used to be deposited and withdrawn through bank branches. Then debit and credit cards were introduced, along with ATMs. They eliminated the need to carry and withdraw cash. With the advent of electronic payments, even the requirement for a physical card has disappeared.
Now just think for a moment, what will be the situation if the banks offer you the opportunity to virtually enter a digital bank branch, obtain assistance from a customer service agent or a bank manager, and then access your virtual vault to withdraw or deposit funds?
What if the banks let you hear the sound of money while you go through the special UI to complete transactions? What if you could make payments using both real money and lawfully deposited virtual funds into your account? Imagine being given the option to pay using Ethereum-based coins and tokens through a connected digital wallet like Metamask, digital money issued by a central bank, or Euros from your current account.
Well, in the rapidly developing metaverse economy, banks can lend money and offer insurance against virtual currency, non-fungible tokens, and virtual real estate through Metaverse. Additionally, they can mimic virtual customer interactions such as cash withdrawals from virtual ATMs.
Similar to the real world, the virtual world will need financial services in order for people to transact, own, or lease digital assets. Banks have exciting opportunities to support loans, investments, insurance, and payment processing in the Metaverse economy. On top of that, the metaverse offers banks the opportunity to inject humanity into banking.
Needless to say, the metaverse has the ability to impose a vital impact on how banking operations are carried out these days. Some of the ways it can or has revolutionized the banking industry are
1Invention of New Products & Creating New Markets
Digital assets, which emerged from the crypto community, are now traded and evaluated in a market. To put it another way, actual money is already being spent by people to acquire virtual goods. They will wish to use their virtual funds for offline purchases as well.
The expanding metaverse economy presents banks with chances to lend against cryptocurrency, NFTs, and virtual real estate, providing an untapped source of growth. Financial institutions must determine the part they will play and seize this chance to build their brand.
The competition’s regulations are already being set. The New York Stock Exchange’s most recent application to patent an NFT exchange foreshadows the impending conflict over who will hold the payment rails and enable payments in the metaverse.
Banks will have the ability to virtualize common consumer experiences, such as cash withdrawals from ATMs that are not physically present, branch storefronts, and actual sponsorships of virtual events. If you push this to the limit, you could leave an appointment with your avatar advisor, go to an ATM, enter your PIN to load your virtual wallet with cash, and then go next door to purchase a virtual purse.
Now the question is what is the impact of your brand’s reputation, mission, and purpose in this new setting?
Although banks are already focusing on NFT-aware consumers, responsibilities in metaverse marketing will change. In the metaverse, marketing will involve working with consumers rather than just selling to them. Marketing’s relationship with customers in the metaverse will evolve from defining to partnering as they become collaborators.
Banks will need to come up with new strategies for fostering trust as well as adapt how a brand stays relevant. As users create areas within virtual worlds, banks should not anticipate being able to just jump in and start making money. Instead, they ought to actively promote community building.
2Personalized & Unique Customer Experience
Customer experience will be one of the main effects of the metaverse on banking. While customers of traditional banking frequently have to navigate complicated systems, the metaverse provides an immersive, user-friendly, and customized platform. Consumers can interact with AI-driven customer support agents, visit virtual bank offices, and have real-time consultations with financial advisors from the comfort of their homes.
Additionally, the metaverse will facilitate customized customer journeys that are predicated on a deep comprehension of each person’s requirements and behavioral patterns. For example, based on a user’s financial goals, past financial experiences, and risk tolerance, virtual financial advisors could easily provide customized guidance.
3Real-Time Financial Services
The metaverse is an ever-changing, dynamic environment that mirrors the round-the-clock aspect of the real world. This dynamic feature will enable banks to provide services in real-time. Regardless of the time or location, transactions, consultations, conflict resolutions, and more can occur instantly. This change could simplify banking procedures and significantly raise consumer satisfaction.
Moreover, as discussed earlier many banks are starting VR training for their employees because 47% of banking professionals believe augmented and virtual reality will become an additional transaction channel by 2030. For example, Bank of America has launched a virtual reality training program for its fifty thousand employees. Employees will be more equipped for interactions with customers in the real world. Well, the credit goes to this program’s realistic simulation of client scenarios.
4Enhanced Security & Privacy
The immersive nature of the metaverse presents new privacy and security problems in addition to opportunities for enhanced customer service and product innovation. Banks will need to make investments in procedures and technology as they investigate the metaverse in order to safeguard confidential data in this novel setting.
A large portion of the metaverse’s infrastructure is built on blockchain technology, which will be essential for guaranteeing safe transactions and data security. It might also be necessary for banks to implement new fraud detection techniques and identity verification systems tailored to the particulars of the metaverse.
The metaverse will alter not just how banks interact with their staff members but also how they speak with their clients. The banking workforce can change as a result of virtual reality meetings, collaboration areas, and training initiatives that increase efficiency, flexibility, and accessibility. Additionally, this technology allows banks to access a wider range of talent without regard to geography.
It is obvious that implementing this technology to its fullest will not be as easy as it seems to be. So here are a few of the challenges that can hamper its full-scale implementation.
In the conventional sense, attackers could appear as someone else in order to use a customer’s credit card or other tangible assets. Can the safety of every user in the metaverse be guaranteed by the rules and security measures in place? This is the big question that demands attention.
Similar to this, in the Metaverse, attackers can use stolen avatars to create lookalike identities or hack other people’s avatars to steal digital assets. Therefore, managing identity theft and the authentication of these identities will be one of the most important difficulties in the Metaverse.
It is commonly believed that in order to facilitate decentralized trade, the metaverse depends on blockchain (Web 3.0) technology. Before the technology is trusted for widespread use in financial services, there have been a number of high-profile failures in blockchain-based organizations recently (e.g., FTX & ASX). These failures are expected to impede adoption and lead to additional regulation.
It will be necessary for the customer to have an extra hardware device at home in order to engage in an immersive metaverse experience. While there are reports of significant movements by Google and Apple in this field, these are now relatively pricey and just a few are worth the investment, such as Facebook’s Oculus and Sony’s impending PSVR. Some people may become nauseous from this immersive experience, which will discourage them from accessing the metaverse.
The majority of consumers still primarily rely on more conventional means of accessibility, such as mobile apps and online banking. This indicates unequivocally that traditional access methods will be replaced by Metaverse technologies. In these conditions, setting up and keeping up a metaverse presence will be very expensive and unlikely to yield a positive return on investment.
1Bank of America
With approximately 4,300 banking facilities around the country, Bank of America is the first financial services company to offer virtual reality (VR) training. About 50,000 employees will be able to practice a variety of basic to complicated jobs and replicate client interactions through a virtual environment thanks to this unique training technology.
The VR program is the most recent addition to the company’s extensive portfolio of professional development resources and its long-standing commitment to the success of its employees.
J.P. Morgan has made an entry into the metaverse by launching the “Onyx lounge”. It is a virtual lounge situated in the blockchain-driven realm of Decentraland. Users can purchase virtual pieces of land in Decentraland using NFTs, a cryptocurrency supported by the Ethereum blockchain.
J.P. Morgan also released a paper stating that it may function as a bank in the metaverse just as it can in the actual world because each virtual world has its own population, GDP, and currency. It can support international payments, foreign exchange, and the creation, trading, and safekeeping of financial assets. In simple words, it will have functions that are similar to those of a bank.
The bank can also assist with problems like transaction status, account confirmation, and fraud protection, much like it does with actual clients. The startup also aims to support content creators who intend to monetize their works in the metaverse, offering them virtual wallets to collect commissions or loans to fund their endeavors.
Union Bank of India (UBI) has introduced the Open Banking Sandbox environment, “Uni-verse,” and the Metaverse Virtual Lounge. According to the bank, Uni-verse allows users to navigate the lounge freely and get information about government welfare programs, digital projects, loans, deposits, and other services, all of which are representative of real-world situations.
The bank states that Tech Mahindra is a partner in the Metaverse Virtual Lounge concept. Additionally, the bank introduced the Open Banking Sandbox environment, which will enable it to work with fintech and startup partners to create and introduce cutting-edge banking solutions.
According to the bank, sandbox environments give developers and fintechs a platform to bring their ideas to life. Furthermore, the bank is introducing an Open Banking environment with the launch of the Sandbox, which will not only make the creative ideas of 3rd party developers a reality but also open up new possibilities.
HSBC has established a fund to seize investment opportunities for its wealthy clients in Singapore and Hong Kong. It is now the most recent financial services firm to make use of Silicon Valley’s emerging virtual reality.
The lender’s asset management division known as the Metaverse Discretionary Strategy is expected to oversee the portfolio. Infrastructure, computing, and virtualization are just three of the five categories in which it will concentrate its investments in the metaverse ecosystem.
HSBC further affirms that it is going to offer immense opportunities as more businesses enter the metaverse arena. HSBC also announced that it is purchasing a piece of virtual land in an online gaming area. It came after JPMorgan’s decision to establish itself in Decentraland; a blockchain-based community.
Innovative virtual reality-based services are now being rolled out by BNP Paribas with the goal of enhancing and streamlining the customer journey. VR technology, which is now in use in several of the Bank’s businesses, including Retail Banking, Real Estate, and Insurance, is creating exciting new opportunities as the Group continues its digital transformation.
Modern VR technologies have a wide range of applications since they allow for process and experience personalization, experimentation, visualization, and projection. With new tools to help with account management and decision-making, BNP Paribas is now offering customers the chance to integrate virtual reality techniques into their banking operations as part of its ongoing digital transformation. This is taking place against the backdrop of changing working practices.
The Metaverse presents banks with tremendous prospects for unrestricted growth within their industry. Conversely, clients will value their banks’ adoption of Metaverse since it will enable them to meet their financial needs more quickly and emotionally. Notwithstanding many obstacles to the widespread adoption of Metaverse banking, it is undeniable that the Metaverse will usher in a whole new era of banking, offering clients a completely distinctive banking experience.
In the end, when it comes to metaverse development services, it is advisable to work with a reputable company that provides dedicated metaverse-based banking software development services. It would assist you in utilizing cutting-edge solutions to improve your company’s operational excellence and maintain relevance in your industry. And when it comes to a reputed metaverse development company, which option is better than Blocktunix?
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