Metaverse and AR/VR : New frontier for banks, financial institutions and FinTechs

Metaverse and AR/VR technologies will open new frontiers for banks, financial institutions and FinTech companies. Goldman Sachs and Morgan Stanley estimate that the metaverse economy could be worth as much as $8 trillion. According to Citi GPS, there will be five billion users in metaverse by 2030. Although several factors affect wider adoption of metaverse, a number of banks and financial institutions are already experimenting with metaverse and AR/VR technologies. Some early adopters are:

J.P. Morgan is the first bank to enter the metaverse. J.P. Morgan has opened a virtual lounge named Onyx in Decentraland.

HSBC is investing in the virtual land of Sandbox metaverse to provide various experiences to sports, e-sports and gaming fans.

KB Kookmin - South Korean Bank —offers a virtual bank. Customers interact one-on-one with its financial advisors in VR and get personalized financial information.

According to Digital Banking Report by Financial Brand, Some 47% of bankers believe that customers will use AR/VR as an alternative channel for transactions by 2030. 68% of global banking executives believe programming the physical environment will emerge as a competitive differentiation in the banking industry, according to the Accenture Technology Vision survey for 2022 .

Source: The Financial Brand

How do Banks and financial institutions gain value from Metaverse and AR/VR technologies ?

In a broad sense metaverse and AR/VR technologies can transform the way they engage with customers, employees and open new business models.

  • Transforming customer experience and building community

  • Reinventing employee engagement

  • Invent new product and services

  • Revenue Diversification

  • Marketing and brand extension

It is critical for banks to personalize and provide differentiation in metaverse experiences. Banks can attract younger, NFT-savvy generation customers and possibly create new products and business models. It is important for banks to connect with creators, gamers and artists. For example, Retail brokerage giant Fidelity Investments launched Fidelity Stack in Decentraland to attract young investors.

Fidelity Investments have also opened Metaverse ETF for investors to invest in businesses in the metaverse.

What Banks can do in the metaverse ?

  • Transform customer experience:

    • Open Virtual branches powered by AI- driven customer agents. This provides scalable model of customer service and deliver instant gratification

    • Offer customers the ability to check balances, pay bills, make transfers and transact using AR / VR channels. For example, BNP Paribas has launched a virtual reality app that enables retail banking users to access their account activity and transaction records in a VR environment. Whereas Citi Bank has tested holographic workstations for financial trading.

    • KYC verification through immersive experience

  • Marketing and Branding

    • Banks can provide sponsorships for virtual events.

    • Use our Virtual product placement and virtual spokepeople to market for marketing of its products and services

    • Host product information and videos - deposits, loans, government welfare schemes and other digital initiatives

    • Banks can use our plot to connect with sports, esports and gaming enthusiasts

    • Conduct virtual events for communities enhance brand engagement

  • New products and services:

    • Embedded banking system : exchange value from virtual worlds to the real world in conjunction with a bank account – integrate with messenger apps.

    • Utilize emergence of new ownership and asset classes : New credit class (for virtual real estate). Banks can offer Metaverse Mortgage for clients who wish to buy real estate in the metaverse.

    • Metaverse ATM : Players in Eikonikos can use the ATM to easily purchase cryptocurrency in the metaverse as they would an ATM in the physical world. Connect ATMs to their virtual land for easy access to cryptocurrency—much like the physical world.

    • Digital payments: Facilitating secure wallet functionality and payment rails for metaverse products, services and economies.

    • Digital assets: Banks can extend their role as custodians of customers’ assets to the metaverse by securing, insuring and lending against cryptocurrency, NFTs and virtual real estate.

  • Improved employee productivity and retention:

    • Remote workers can now meet in an immersive environment to discuss projects, share ideas, and provide feedback.

    • Improve communication and collaboration

    • Employee training and development : Metaverse-based training simulations, employees can learn new skills faster. For example,  Bank of America offers VR training in nearly 4,300 financial centers nationwide. The augmented way of training allows employees to practice a range of routine to complex tasks and simulate client interactions through a virtual environment.

    • Create employee recreational hub in metaverse:

      • Recreational centers can host games, parties and other social events.

      • The access to the hub can be with NFTs issued to the employees.

      • Avatars of employees can hangout in weekends and after office hours

A non-fungible token (NFT) is another area that banks and financial institutions should leverage to provide enhanced experience and redesign business models. Banks can use, instead of physical assets, NFTs to loan against and insure.

  • Sweden’s Mercobank is piloting a digital asset custody service using NFTs.

  • New York StockExchange has filed Trademark Application for Its Own NFT Marketplace

Increasing number of brands are entering the metaverse. Phygital will define e-commerce in the metaverse. Banks need to strategize to engage with these brands and identify monetizing.

Imagine a 17-year-old gamer who $2500 in tokens inside a video game, but needs $150 in real-world dollars for purchasing a gift to his parents. The bank can hold the game tokens in escrow and provide the player with a payday loan. If the gamer doesn’t repay, the Bank can sell the game tokens on its marketplace to other players to compensate for the loss.

A number of Banks including but not limited to Commercial International Bank ,American Express Bank, Union Bank of India, Quontic Bank, Zelf, DBS Bank, Standard Chartered Bank have already made footprints in the metaverse world.

Metaverse and AR/VR technologies will provide boundless opportunities for Banks and financial sectors in the coming years. Metaverse projects such as Eikonikos are some of the projects that will provide great experiences for banks and financial institutions to experiment their metaverse projects.

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