Banking in the Metaverse: Evolving Opportunities To Explore Now

Thanks to its combination of virtual reality, blockchain, and Web 3.0 technology, the metaverse is creating its own economy and payments ecosystem – one that requires the experience and expertise of both traditional banks and fintech innovators to grow and thrive. Patrick Bucquet, VP at Capgemini Invent, takes a closer look at the opportunities that can be mined as banking in the metaverse evolves.

For many people, avatars, gaming, and virtual events define the metaverse now, but financial institutions see the metaverse as a fast-growing, $50 billion marketOpens a new window . 

There are major opportunities for the financial industry to leverage existing financial services, risk management, and know-your-customer capabilities into the metaverse to manage blockchain transactions as well as transactions involving government-issued currencies, tokens, and more. Banks and fintechs of all sizes have options for establishing themselves in the metaverse now and evolving along with it. Let’s look at some of the most compelling opportunities now.

Establish a New Channel for Customer Engagement

The simplest option for banks who want to move into the metaverse may be to use it as another channel for engaging with customers, similar to their mobile, social, and internet channels. Creating a presence in the metaverse is a critical first step for many brands, so they can experiment with new forms of engagement. 

This might take the form of a partnership with a client or vendor that already has a metaversal presence, or an extension of the bank’s social media presence into metaversal experiences. For example, some banks are buying virtual real estate in gaming environments where users can take part in bank-branded experiences within the games. 

Provide Always-on Services

Unlike physical bank locations, banks in the metaverse can operate 24*7. Because the interactions are virtual, there’s no need to close the building, stop processing transactions for the day, or send employees home. Instead, metaversal bank branches can be automated to run continuously so that customers can receive service whenever they want. For example, a customer might visit a metaverse branch of their bank to arrange for digital currency exchange, to make a loan payment, or for some other kind of transaction that might otherwise require a visit to a brick-and-mortar location. 

Always-on, immersive virtual banking has the potential to go beyond the traditional app and bank-by-phone options for after-hours services by providing a faster, more personalized experience that doesn’t require waiting in line, tapping through apps, or navigating an impersonal phone menu—which can improve customer experience. By offering an alternative to in-person banking, always-on virtual services can also help banks increase their operational efficiency. 

See More: Unleash the Power of Data To Drive Innovation in Finance Industry

Build New Payment Rails

There are already plenty of opportunities to transact in the metaverse, from purchasing virtual real estate to in-game microtransactions and cryptocurrency. As more businesses find new ways to operate in the metaverse, those transactional opportunities will expand and evolve. And they will all need rails to move that currency from payer to payee–whether the currency in question is dollars, euros, bitcoin, in-game tokens, or something entirely new. 

For example, let’s say that a brand would like you to watch its latest advertisement in the metaverse. Your time and attention are valuable, so you should be compensated for that, perhaps in tokens or loyalty points you can spend with the brand. Creating the infrastructure to support these and other new kinds of metaversal transactions represents an opportunity for financial institutions, especially those with existing payment rails experience and technology. Major banks are already building a high-quality, peer-to-peer blockchain network to address metaversal transaction requirements. Startups and smaller banks are likely to follow suit with their own payment rail projects. 

Manage Risk for New Asset Classes

The core expertise that banks have around risk management and compliance for traditional assets and transactions can evolve into risk management and compliance service for digital assets and virtual transactions. For example, metaversal avatars and users with multiple digital identities may complicate the ability to meet Know Your Customer requirements for banking and investment. And as recent events with cryptocurrency have shown, metaversal assets can be more volatile than traditional ones, which highlights the need for risk-management expertise in this space. 

One path to apply real-world risk management experience to the metaverse is to map existing management and compliance frameworks onto metaversal transactions and assets and then carefully define the risks for those transactions and assets. Risk management opportunities may also include overseeing the transfer of assets within the metaverse and from the metaverse to the real world. For example, the sale of an NFT by a real-world museum might require specialized risk management to ensure the asset’s authenticity and the sale’s security. Or in another case, the purchase of a major digital asset might require loan underwriting that encompasses both the borrower’s real-world and virtual financial profile. 

Planning a Move Into the Metaverse

Any financial institution considering an expansion into the metaverse should start by deciding whether they want their initial foray to be relationship-oriented or transaction-oriented. For example, the metaverse can allow banks to get closer to their clients through channel expansion and virtual branches. That relationship-focused metaversal presence can later extend to new transaction opportunities, such as tax reporting on metaversal bank and investment accounts. 

For larger institutions, an initial focus on transactions can help create an early-mover advantage in areas like payment rails or decentralized and automated finance. The transactional approach is also a good initial strategy for banks that are ready to leverage their risk management model in the metaverse. 

After choosing an initial strategy, it’s time to learn as much as possible about the resources necessary to implement it. Because there are so many startups–particularly fintech startups–developing services for the metaverse, there are plenty of innovative companies for banks to learn from and perhaps partner with. Partnerships can also accelerate banks’ time to market for metaversal initiatives. 

As with any new technology environment, the metaverse is sure to change over time. However, that’s not necessarily a reason to delay entry. Creating a presence sooner rather than later can help banks connect with Gen Z consumers who now have $360 billion in disposable incomeOpens a new window , improve the customer experience, and create more value for shareholders over time as the metaverse gains users and use cases. 

Are you planning to expand your financial transactions into the metaverse? Share your thoughts with us on  FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window . We’d love to hear from you!

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