Metaverse can influence the way banks engage with their customers, invent new products and enable services.
Going to the bank to get your first credit card or savings account was an exciting experience, which most likely started a long-term connection with your bank. What will be the first memories of banking for future generations? The empathic and meaningful interactions we used to have are vanishing day by day.
Metaverse can be defined as a collective virtual shared space, created by physically persistent virtual space and the convergence of virtually enhanced physical reality. It is a sum of Virtual Reality (VR), Augmented Reality (AR) and the Internet. VR and AR are nothing new for passionate gamers, but, in other industries, especially banking, it could create a revolution. The potential of VR and AR’s power to create an exceptional user experience is still not fully realised.
Apart from the enormous potential for product and service innovation, the Metaverse offers a chance to reintroduce dialogues that have been lost in digital channels—to create memorable experiences for the next generation of banking customers, many of whom may never need to visit a bank branch in their lives.
A customer could have a more engaging experience with a service representative or advisor represented by a realistic avatar than with the screen of a chat application or even a video call. Unique experiences will be the key to attracting future generations into Metaverse banking. Initially, brand owners might establish their own spaces within the metaverse, or look to Big Tech to create metaverse-as-a-service platforms they can engage with. In future, these spaces will probably evolve beyond the brand or company websites that are commonplace today, into more neutral spaces where subtle and sophisticated interactions can take place, and in ways that are fluid and free-form.
User Experience: Traditional Mode versus Metaverse
Bank branches were used for depositing and withdrawal of banknotes. Then ATMs came along with the introduction of debit and credit cards, obviating the need to withdraw and carry cash. Even the need for a physical card has vanished with the development of electronic payments.
What if the next change in the line is the banks offering you to virtually enter a digital bank branch, take the help of a customer representative or a bank manager and then allow you to enter your vault to digitally take out or deposit money virtually? What if the banks allow you to hear the sound of money as you are engaged in the process of transactions over this unique user interface? What if you could pay with real money as well as virtual money deposited into your account legally? Imagine being offered to pick between paying with Euros from your current account, digital currency issued by a central bank, or Ethereum-based coins and tokens via a connected digital wallet like Metamask.
Through Metaverse, banks can lend and insure against virtual currency, non-fungible tokens, and virtual real estate in the burgeoning metaverse economy. They can also simulate virtual client interactions like cash transactions from virtual ATMs. The virtual world, where people may transact and own or lease digital assets, will require financial services, just like the actual world. In the Metaverse economy, banks have intriguing prospects to facilitate payments, investment, insurance, and loans. But the Metaverse’s potential doesn’t stop there: it also gives banks the chance to reintroduce humanity into banking. Digital banking is functionally correct but emotionally bereft in today’s digital environment.
Global Surveys Forecast for the Metaverse Economy
According to the Accenture Technology Vision survey for 2022, 67 percent of global banking executives believe the metaverse will have a positive impact on their companies, with 38% believing it will be a breakthrough or transformational technology. Around 92% of respondents agreed that future digital platforms must provide unified experiences that allow customers’ data to be shared across platforms and venues.
According to Goldman Sachs and Morgan Stanley, the Metaverse economy might be worth up to $8 trillion. Banks are among the entities that are most positioned to meet the Metaverse’s growing need for digitally native currency and identification.
Present Scenario & Future Assessment of the Metaverse Economy
JP Morgan became the first bank to enter a metaverse in the beginning of this year. It debuted its Onyx lounge in Metajuku, a virtual recreation of Tokyo’s Harajuku shopping district, on the Decentraland. Its lounge is furnished with a free-roaming tiger and a portrait of its CEO Jamie Dimon. In the last six months, the Metaverse has gained traction in a variety of industries, including banking. While advances in hardware and software allow the Metaverse to connect the actual and virtual worlds, it also requires an economic system to thrive. NFTs will take centre stage here in order to unlock value in the Metaverse. Demand for a trustworthy method to drive value exchange in the Metaverse will rise as the Metaverse becomes the standard for playing, working, and socialising in the future. Companies should not wait much longer as joining Metaverses now is the perfect time. Becoming a part of the Metaverse financial infrastructure now is the equivalent of creating a website, or online store, in the early 90s.
What will determine when banks make the shift?
As banks’ major business involves customers and money, and as these two are becoming increasingly virtual hence it is just a matter of time before we see more and more banks join the virtual world.
There are two major aspects that may determine when banks make the shift. The first is the circle of clients. When clients were present in the physical world only, so were the banks. Banks are now online, too, since customers spend hours a day online. If the customers are spending hours a day engrossed in an alternate universe, the banks will follow suit. They must, after all, they need to be where their customers are.
The second circle of influence is monetary. Banks used to sell items that were based on real-world elements, but this has altered due to abstract factors such as algorithms. Money can now be created in cyberspace using cryptocurrencies and non-fungible tokens. Generation Y and Z grew up in the world of the internet, but Generation Alpha is maturing in the Metaverse. Future generations will always be on the look-out for quick and easy ways to make money. This pursuit might lead them to options that expose them to higher risks, with non-fungible tokens being a prime example at current times.
Will Decentralized finance be a threat for the banks?
What if it is quite the opposite, a massive opportunity to leverage the investments that banks are making to cloud and AI infrastructure and increasingly also to distributed ledgers? Remember internet banking in the 90s? It didn’t destroy banks. It strengthened them while also drastically lowering operational costs and offering use cases that would have seemed unthinkable to bank personnel in 1992.
How will Banking in Metaverse Operate?
To truly realise the possibilities of the Metaverse for banking, one must first understand what a Metaverse is, and the components that make up this digital copy of our current reality. To that aim, the puzzle consists of four unique pieces: technology, platform, marketplace, and commerce.
Each one is propelled by a distinct collection of ecosystem participants, each of whom has gone through a distinct maturation process. Two sorts of gadgets will be used to create the Metaverse: holographic and immersive. Holographic devices project digital items into the actual world, making them appear as if they are there. By concealing the physical environment and substituting it with virtual reality, immersive technologies provide an immersive experience.
Metaverse can bring huge improvements in the banking sector, influencing the way banks engage with their customers, invent new products and enable services. Money was once thought to be tangible banknotes exchanged by people to get goods and services. The future will depend on how well bankers, designers and security analysts are able to identify the elements and offer a unique customer experience to the future generations while preventing fraud and addressing concerns around privacy and data protection. Metaverse will be the playground for the future generations. The challenge will be how to leverage its unique features to design a truly immersive user experience for customers visiting the bank digitally.
(Chandni Jain is an Art Director and Product Designer and can be contacted on Twitter: @ichandnijain and Instagram: @chandnijain.in)