Metaverse, the virtual world existed way before Facebook rebranded itself to Meta. However, after this move of one of the world’s biggest tech giants, things seem to be happening at a super-fast rate in the metaverse. Metaverse has been witnessing its accelerated maturation curve with heightened expectations and a rise in activities. Many companies are in the running to patent their trademarks to protect their share of the metaverse.
The metaverse industry soared during the pandemic when more and more people turned towards online gaming. According to reports, the company soared to total revenue of $154 billion in 2021. Although metaverse is rapidly expanding beyond gaming, we know that the next phase of the same is approaching faster. And the fear of missing out for banks is greater than ever.
According to reports from Bloomberg Intelligence the entire industry will be valued at around $800 billion by 2024.
With the associated markets also expanding, it may not sound exaggerated when we say that the metaverse is more likely to become the natural habitat for humans in the near future. Gartner has even predicted that by 2026 25% of people will spend at least an hour in the metaverse either shopping, working, or for entertainment purposes.
Since most of the commercial activities will be conducted in the metaverse, it is likely that we also need a financial system. Although we have cryptos, decentralized finance to aid us in this, does this mean the traditional banks will lose their existence? or even better, will they find themselves within the metaverse? To answer these questions let us first dive into the traditional banking mechanism and the roadmap these financial institutions are most likely to follow concerning the metaverse.
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The traditional banking system is a two-tier model with the central banks at the head. Banks heavily rely on one-to-one customer interaction. Traditional banking was manual and was paper-based lacking personalization and customization of services. To replace the traditional banking system came the digital banking model. The entire paper-based model was now cloud-based. The entire process was now digitized. In this model, new customer journeys were built with data kept in mind. Banks more or less operate like tech companies offering improved customer experience and operations.
Blockchain technology has risen significantly over the past two years. Blockchain has made the entire process of the economy cheap, fast and borderless. Blockchain has removed the need for intermediaries and has made the entire process decentralized. Cryptos play a significant role in the entire process. NFTs and central bank digital currencies have led to the rise of new virtual as well as creator economies by unlocking the potential real estate, art and gaming have. According to experts, traditional banking institutions must come up with a strategy to address these new changes along with bringing in regulations for the same.
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Although banking is functionally complete it’s not emotionally driven. Metaverse might serve as a medium to bring the much required human touch to banking systems which in turn will deepen the connections between the customers and the institutions. The metaverse also serves as a medium to reach a new audience, especially the NFT savvy youth. Banks must find out ways to connect with their audiences in new ways. We as a generation remember going to banks along with our guardians to get our bank books stamped, ever wondered what the metaverse age of banking will look like?
Customers might virtually visit the bank branches for better customer service or might even get a house tour with mortgage brokers in real-time. Avatar advisors might come in handy to discuss early retirement plans or might serve as a model for customer participation in bank-sponsored community programs. With JPMorgan aligning some of its goals in metaverse banks have likely realized the potential of the metaverse.
Did you know? Banks in South Korea like Kookmin allow one-on-one consultations between employee avatars and customers in their virtual bank along with providing access to personalized financial information.
According to reports, 47% of bankers believe that customers will most likely use augmented reality (AR) or virtual reality (VR) as an alternative source of channel for transactions as early as 2030. It won’t be a surprise to see the industry boom by then if it continues to make its mark at the same speed. Banks such as BNP Paribas have launched a VR app allowing the customers to use those during banking transactions such as account opening and others. Citi Bank on the other hand is testing holographic workstations for financial trading.
Employee experience can also be elevated with banking in the metaverse. Bank of America conducts immersive training using VR where real customer service-related scenarios are simulated allowing the employees to detect emotions and adjust their behaviors accordingly in a risk-free environment.
Crypto space led to the birth of NFTs and other digital assets that can be exchanged for value in the market. People are already spending millions of dollars to buy virtual digital assets be it NFTs, land, or cryptos. The growing economy in the metaverse is an untapped source of growth and has numerous opportunities for the growth of banks. In situations like these, banks must realize the importance of accepting the new-age technology and catering to the new-age audience. Recently the New York Stock Exchange filed a patent for an NFT exchange. This shows the power metaverse has and how early birds can gain an advantage from the same.
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The evolution of brands in the metaverse will differ from what we see today. As customers now become collaborators, marketing the brand right will become important for the banks. With numerous big names entering the metaverse already, in no time we shall see a lot of financial institutions entering the new space to acknowledge the new opportunities. The bottom line remains the same. If you haven’t already started to educate yourself about metaverse and the new technology, start doing it today.
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