‘Metaverse’ is the current buzzword in the virtual technology sector. Its mission? To transform our lives by creating an immersive, decentralised world. While we go about our normal daily lives, there is another world where we can perform the same functions in a digital environment.
The Metaverse is an evolution of where we have come from with Web 2.0 – the era of SMS, Web and Mobile. It will offer more collaborative and decentralised brand experiences to end users across multiple industries and services. This means that interactions, rewards, and spend with one brand or product can be used on other platforms. Analysis by Bloomberg Intelligence states that a large number of companies will enter this crusade by 2024 thereby pushing the market size to $800bn. The Metaverse is already here; it’s not the future. It’s here now and will continue to evolve.
Already, we are seeing industries such as gaming, retail, and real estate join the fold thanks to advanced technological developments such as blockchain and 5G. Unreal Engine and Unity’s immersive capabilities are challenging big tech companies to think about how they can best meet customer demands.
Justin Bieber performed live in the Metaverse, a virtual music experience called Wave XR. BMW developed NVIDIA’s Omniverse technology to create a digital duplicate of its factory floor and reduce the cost of production. Some of the most prominent brands around the globe are investing in the Metaverse.
Metaverse transactions are a result of the interaction between brands and consumers. What will it take to make financial institutions thrive in the digitally-evolved world?
Banking before the Metaverse
The traditional bank experience has been a nostalgic reminder of a physical space in which the parties were two-dimensionally present to lend and avail services. Manual work was a major part of the transaction process. Customers needed to be physically present to take advantage of the bank’s services.
Then came the shift from traditional bank experiences towards digital banking. Transactions were made paperless through digital channels. A customer’s physical presence is no longer required. The digitalization of banking services led to a total overhaul of customer journeys, customer satisfaction targets, and the demand for decentralised, regulated data security.
Digital banking functions in a similar way to technology firms. They had to integrate technology into improving their services, and building customer relationships. While digital banking can be convenient for customers, it is not personal and engaging.
Customers have lost touch with traditional banks.
Traditional banks continue to drive transformation programmes in order to provide digital services for consumers, automate their back-office experience, and meet ongoing regulatory requirements. One could argue, however, that the relationship between the bank and the customer isn’t personalized nor engaging. This is in contrast to the relationship a consumer might have with retail or commercial brands.
Customers have lost touch with their banks. Traditional banking was largely based on human relationship management. The Metaverse’s immersive experience allows banks to potentially leverage new ways of engaging with their next generation customers, as well as extending their reach to decentralised platforms and communities.
Transition of functionalities in the current system of operation vs. The Metaverse world
New Currencies on the Rise
With the advent of blockchain, currencies like cryptocurrency are now available for trade, investment and transacting. It also allows for the creation and transfer of Non-Fungible Assets. The customer can access their financial assets directly through a system of decentralised networks without the need for intermediaries like banks.
Traditional banks would be less needed if the network was decentralized. Banks are looking to enter the Metaverse and streamline bank operations. They also want to replace traditional financial instruments by standardised digital assets. To make the most of this opportunity, banks must decide what roles they will play in order to grow their brand.
These currencies are being used by Millennials and Gen Z, the younger generation. It would be interesting to see how banks cater for a group of consumers who have a good grasp on the most recent financial trends and technical advances.
Opportunities for banks in the Metaverse
Banks must find potential customers in the Metaverse before they can start to identify them. It can take time to get to know their financial needs and offer financial services. The demand to purchase virtual properties is driving real estate prices up in the Metaverse. It is possible to provide loans and leverage mortgage services to investors in real estate.
Metaverse is an attractive marketplace for young people who are passionate about art, gaming, entertainment and other related topics. You can offer services to them in the areas of financial planning, loans, depository accounts creation, and many other things. Customers are being encouraged by banks to use AR/VR technology to check balances, make transfers, pay bills, and transact. Banks have the chance to reconnect with customers, build meaningful relationships and make lasting connections throughout the customer journey.
Metaverse banks will be able offer the same services as in the real world, including withdrawals from ATMs and depositing money. They can also interact with representatives to provide assistance and guidance. Customers will have the ability to view and transfer data between their accounts in 3D.
Preparation for the Metaverse
The last thing that banking professionals should know is how to use the Metaverse. It is impossible to overlook a market of $800bn. Bank professionals need to be Metaverse-educated. This potential must be recognized by banking executives worldwide and they should prepare to enter Metaverse. While we are seeing some footsteps in the industry, other industries such as Gaming are far more advanced.
JPMorgan Chase and KB Bank are now part of the Metaverse
JP Morgan, the U.S.’s largest bank, has opened a branch in Decentraland to sell digital assets. It is located in Metajuku, a virtual version of Tokyo’s Harajuku shopping district. The company also released a research paper explaining the opportunities they are exploring in the Metaverse, including operating like a bank in the virtual world much like it does in the real world. It can facilitate cross-border transactions, foreign exchange, financial asset creation, trading, and safekeeping, much like a bank.
KB Bank of South Korea also introduced a VR version of its branch in the Metaverse where employees will be represented through avatars. Customers and employees will be able speak directly to each other.
The Metaverse wants to see a rapid adaptation of financial institutions and banks, but the immersive virtual space raises many questions that need to be answered. Decentralised Autonomous Organisations’ core driving force is Web 3.0. Transactions take place through digital currencies. Transactions, interactions and experiences in the Metaverse have to be monitored and governed to build trust.
Here are some of the biggest challenges:
Governance and security
In the traditional sense, attackers could represent themselves as someone else to utilise a customer’s credit card or other physical assets for malicious purposes. Can security measures and existing regulations be used to protect all metaverse participants?
Similarly, in the Metaverse, attackers have the possibility to construct lookalike identities out of stolen avatars or hack others’ avatars to steal digital assets. The Metaverse’s key challenge will be to identify and authenticate identity theft.
The widespread assumption is that the metaverse depends on blockchain technology (Web 3.0), to allow decentralised commerce. There have been several high-profile failures in blockchain based organisations recently (e.g., FTX & ASX) that are likely to slow down adoption and drive more regulation before the technology is trusted for mass adoption in financial services.
An additional hardware device will be required to allow the consumer access to an immersive metaverse experience. At present, these are relatively expensive and there are only a select few worth the investment – such as Oculus from Facebook and the upcoming PSVR from Sony — whilst there are rumors of big moves from Google and Apple in this space. The immersive experience can cause nausea for some users, and may deter them from exploring the metaverse.
Many people won’t want to move away from traditional access methods, such as mobile apps and internet. This means that metaverse technologies won’t replace traditional mobile apps or internet access for business. Metaverse presence creation and maintenance will incur additional costs that must be justified by a return on investment (ROI).
The bottom line
The Metaverse is seeing a lot of growth. People and companies are looking for ways to work together. The introduction of innovative technology and the emergence of new currencies will be distinguishing elements of the Metaverse’s financial market.
Banks have the chance to restore benevolence by building trust. These are the people who will use banking services most. Banks need to be able to communicate with clients as specialists and counselors in financial matters.
The introduction of innovative technology and the emergence of new currencies will be distinguishing elements of the Metaverse’s financial market.
At Synechron, we’ve been market leaders in some of the core Metaverse technologies such as Cloud and Blockchain since their inception. These technologies are used in many of our programs every day. Our role as consultants and partners is to help brands navigate the Metaverse. To find the right spot, we work with them to create new revenue streams by creating immersive products, services, and public relations initiatives.
Peter McConville, global head of digital at Synechron
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