Metaverse in Banking Industry
The metaverse combines various aspects of social media, online gaming, AR (augmented reality), VR (virtual reality), 3D, hologram, and cryptocurrencies to allow users to interact virtually.
It’s a virtual-reality space in which users can interact with a computer-generated environment and other users.
I see bank & banking having 4 stages while moving into the metaverse.
Stage 0:
This is the current stage. We are already seeing, people buying lands on metaverse. They are investing in NFT. Here NFT is acting like a collectible.
So, in banks, as part of Wealth Management, we will see, NFT, cryptocurrency, ‘Land in metaverse’ as new asset classes.
Based on the customer’s risk appetite, bank’s overall ecosystem & government regulation, more money will flow into these new asset classes.
We also see, a Mutual fund, which will pool money & invest in basket of NFT, ‘Land on Metaverse’. Many people will be able to own, part of NFT, piece of land on Metaverse by investing in this Mutual Fund.
Stage 1:
In this stage, banks will offer an immersive banking experience to their customers, who still want to visit a bank.
So, these customers will be able to visit their bank.
In this immersive experience, once a customer visits a bank, he will see other bank customers chatting/talking, bank staff helping other customers.
A bank in the metaverse: Here, where customers can be engaged and provide more insights and personalized attention with virtual assistance.
It can enable customers with a 360-degree view of their current position, the various status of their requests, new offerings, and many more.
The customers and banking employees will be represented as avatars in the digital space, and they will have access to all of the can create the services offered by the bank.
Customers will have a personalized chat with any bank personnel for any service.
So, for customers, no more waiting in the queue. Though as of now also, we can have a video call with our Relationship manager, it doesn’t give a total 360-degree view.
Also, if RM has to explain something on paper/do whiteboarding, it’s difficult for both customer & Relationship Manager.
This friction/inconvenience will be removed in Metaverse.
Metaverse Cloud : Instead of each bank building their own metaverse, banks will try to join hands & offer a ‘Banking Metaverse’ on Cloud.
In that, various banks & some other merchants will be participating & customers of different banks need to visit only this ‘Banking Metaverse on Cloud’.
Gamification of banking: Also, bank will offer gamified solutions to their young & other customers.
This will help the young in learning basic banking operations. Also, it will help others to understand the various complex investment product like Structured Products.
Risk Profiling of a customer may include some of his behavioral aspect on Metaverse.
Reduction in physical branches & Call-centers:
As of now, many banks have various physical branches. In my opinion, the bank will reduce its physical branches & move towards the metaverse.
On a similar note, in many cases, the bank support teams (helpdesk, call-center etc..) are not customer-friendly. Banks are trying to use Chatbots, AI, automated messages, etc. to somehow improve efficiency & engagement.
In my opinion, the bank will close/reduce these call centers and will start providing help/support to customers in the metaverse.
By reducing physical branches & various call centers, banks will be able to invest in Metaverse, which will provide a better experience to customer.
Bank of America, UBS bank & London traders with Microsoft HoloLens smart glasses have already started this journey.
Win-win for all.
Stage 3:
Banking has to move, where the customer is or better to say, where the customer wants to spend money.
We have already seen examples of that.
Today, when you buy something on the internet, after you have selected the items, you can pay on that website by your Banks card, net banking. So banking is available on the online shopping website.
On similar lines, you will see that on various websites, which help you choose a house or car, various banking offers are shown to you at that point of time.
To reemphasize, banking has to be there, where the customer is doing a purchase or going to make a purchase decision.
That’s the reason, we have seen, so many ‘Payment companies’ coming up in the last decade. They are helping you to do payment transactions when you need & where you need.
Taking this forward, as more people will spend time & make purchasing decisions on Metaverse, banks need to provide facilities to complete those transactions.
So, if someone is buying ‘virtual land’ in the metaverse (say on DecentralLand), banks need to help in buying that land in the metaverse.
Based on the regulation, it may happen that banks will provide him a loan in that metaverse crypto-currency (say MANA) or allow the customer to convert the fiat currency into metaverse’s cryptocurrency.
Payment & micro-loans will again play a big role initially. The bank should be equipped to facilitate payment or loans disbursal in Metaverse.
In any payment transaction, these 3 things are important
- The identification of buyer & seller or the 2 parties, who want to transfer funds.
- The identification of goods or services for which fund transfer is happening, so if you are buying a costume for your avatar or buying some points in an online game.
- Agreement on transaction information.
In the real world, for payments, we use cards/net-banking and mobile phones as carriers to recognize people, and recognition methods include encrypted currency, biometric information, etc. On the secure carrier, users store their unique identification code.
In the Meta Universe, we need to think about a secure medium. And this will be an interesting space to watch.
We need to predefine, develop and implement a solution for metaverse, which will serve all the crypto transaction and crypto investment needs.
Stage 4:
Moving to this stage will depend upon many factors including, government regulations, a really secure system, willingness of current tech giants to participate.
Hallmark of this stage will be the democratization of data & Defi (Decentralized Finance).
Though, WEB3.0 has already our journey in this direction (for the democratization of data as here each individual will be able to own his/her own data).
So, no big tech giant watching, about my daily life including, what I purchase, which place I travel & how do I spend my money.
Taking this further, the bank will not hold my data. I will be able to share my data, with whom I want & extract a better product and better deal.
There may not be a central bank currency.
As fewer intermediaries will be involved in a transaction (say fund transfer), the cost of a transaction itself will come down.
We will see more collaborative P2P (Peer To Peer) Lending. On similar lines, a direct purchase & sale transaction between 2 parties using blockchain & cryptocurrency.
As the central theme of banks is to provide ‘Trust’. With the adoption of blockchain, people may trust transactions & currencies, where the underlying technology is blockchain.
Many Government will introduce CBDC ( Central Bank Digital Currency) and will tell citizens to do transactions through CDBC.
Reason being, currently government earn revenue by levying taxes on various goods. To maintain their revenue, CBDC will help central banks, respective governments.
Conclusion:
In the past, we have seen the emergence of many technologies. Some technologies have benefited us immediately, some came back after some time & some just died down.
How metaverse will involve. This is a big question & only the future will tell.
But given the – Interest of Big tech companies in this space
Possibility of new normal post the pandemic where people still want to avoid travel but expect immediate gratification while sitting at home
A young population who is already more aware of online than offline ..playing more online games as well as being much more conversant on online social media
We can safely deduce that Metaverse will be an interesting space to watch.
And if more people start spending their time, attention & money on metaverse, banking needs to move to Metaverse.
Banks not having a presence on metaverse will be left out…and will not be able to participate in this new creator economy.
