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Is the metaverse having its fifteen minutes of fame – or is it here to stay?
Speculations about where this transformative technology will lead continue to turn in people’s minds. Professionals in banking are not exempt from this. They have long known that one way to gain customer loyalty is to capture their attention while they are young. Hence, banks are not necessarily slow to pick up emerging trends – including the metaverse.
Metaverse banking poses many questions – how will it work, and what will be the opportunities for both banks and customers?
What is the Metaverse?
The term “metaverse” was coined by science fiction author Neal Stephenson in 1992 in his novel Snow Crash. However, the concept of technologies underpinning virtual realities dates back several decades.
Currently, the metaverse refers not to any one technology, but rather a wide variety of technologies and experiences – some of them even speculative. It is expected by many to become the next iteration of the internet: an immersive, shared, virtual 3D space.
Some technologies, such as augmented reality (AR) glasses and virtual reality (VR) headsets, are advancing quickly. Others, such as interoperability standards and sufficient bandwidth, are experiencing more sluggish growth or might never even come to be.
Optimists say that the metaverse will reshape the way people work, socialize, and engage with businesses. Returning to the concept of capturing consumers’ attention while they are young, Gen Z consumers are digital natives – that is, when they search for services or products, online is their default option. The metaverse can provide banks with new ways of connecting with them.
Emerging platforms for the metaverse such as Decentraland and the Sandbox attract hundreds of thousands of visitors every month. Well-known gaming platforms with functionality similar to the metaverse, such as Fortnite and Roblox, have attracted millions. Their audiences and customers want to do business with organizations that share their enthusiasm and understanding of virtual worlds.
Banking in the Metaverse
The future of the metaverse carries a golden sheen if Goldman Sachs has anything to say about it. They estimate that the metaverse economy could be worth 8 trillion USD. And banks are among the organizations best positioned to cater to the growing demand for currency and identity in the metaverse.
As consumers become more and more akin to partners, banks will have to reconsider how they create and share value.
One of the more obvious uses of the metaverse, particularly for retail banking, is creating “virtual branches”. Through these, banks can sell products or provide customer service to both new and existing customers.
Banks can also build relationships and deliver advice. This is especially useful, as many people accuse current banking of being too commoditized and devoid of emotional connection. The metaverse can step in where text messages and app alerts feel soulless and impersonal.
Forward-thinking banks will not just shift into the metaverse and monetize it. Rather, to build trust and create engagement, they will strive for a transparent, two-way relationship. This way, customers will be aware of the bank’s objectives.
Among banks who have already set up virtual storefronts is HSBC. They were the first global financial service provider to purchase land in the Sandbox in March 2022, and plan to use it to engage with e-sports enthusiasts and online sports fans.
What’s more, in February 2022, JPMorgan Chase & Co. became the first bank to open an office and lounge in the metaverse. The space launched on Decentraland, and JPMorgan stated that the metaverse would “infiltrate”, in some way, every sector in the future.
But what about your bank? Despite the rosy outlook these examples may provide, there are some challenges for banks investing in the metaverse. Generally, these revolve around acquiring the necessary business knowledge and skills, identity management, and maintaining customer privacy. These points should be kept in mind for any metaverse strategy.
Opportunities and Benefits of Metaverse Banking
There are many a metaverse strategy that banks can use.
1. Create New Services and Products
The metaverse will provide opportunities to banks to create novel banking services and products. These could include the following:
Digital assets: Insuring, securing and lending against virtual real estate, NFTs and cryptocurrency.
Digital twins: Digital twinning involves creating a virtual “twin” of a property or asset, such as a bank branch or home. Bank employees could use digital twinning for underwriting loans.
Digital payments: Facilitating secure wallets and payment rails for metaverse economies, services or products.
2. Reinvent Existing Experiences
Banks can leverage VR/AR technology to create 3D customer and employee experiences.
They can offer customers the ability to pay bills, make transfers, check balances and transact. Furthermore, they can deliver immersive learning experiences for employees in the safety of simulated environments, and onboard remote workers in ways that are both fun and create a sense of community.
3. Engage with Customers in Exciting New Ways
The metaverse can offer opportunities to reimagine ways to connect with customers, who can interact with avatars or visit brick-and-mortar branches that offer metaverse capacities.
Brand and marketing extensions: Banks can virtualize certain interactions, such as branch placement, withdrawing money from ATMs, endorsements, and branding. They can also bring governance, social and environmental credentials to life.
Personalized interactions: Banks can provide personalized financial advice, such as financial planning sessions, annual portfolio reviews, and product recommendations virtually.
In some ways, the future of metaverse is already here. Gaming, retail, hospitality, fashion, and food brands have entered the metaverse in recent years. Now, banks are jumping on the bandwagon as well.
Metaverse banking may or may not be the future. But right now, what’s not in question is the benefits that artificial intelligence (AI) brings to the table. A great example of AI that can benefit banking is CrushErrors, a patented tool meant for reconciling huge amounts of data.
NextGen Accounting’s services are powered by CrushErrors. We offer credit card reconciliation services, bank reconciliation services, reconciliation automation, financial consulting, financial reporting, and audit and anti-fraud assurance. Our services are specially tailored to firms with vast amounts of data that are extremely difficult to reconcile.
To give you the fastest and most accurate reconciliation, we use our patented software CrushErrors, which you can also obtain as a product if you’d rather conduct reconciliations in-house.
NextGen Accounting’s management team has decades of experience and includes former executives of Barclays Bank, Bank of America, and ICBC. Contact us today for reconciliation services or book a free demo if you’d like to get CrushErrors!