Rajashekara V. Maiya, vice-president, global head, business consulting – Finacle at Infosys, discusses how the metaverse is set to transform the banking sector
The metaverse, defined as a network of 3D virtual worlds or a virtual reality space in which users can interact with a computer-generated environment and other users, is quickly gaining popularity. With multiple uses and features of this virtual reality space being discovered and explored every day, it is clear that metaverse very well could be the next big thing.
Several factors, including technology innovations and the rise of the experience economy, are fuelling this rapid growth. For businesses across sectors, the metaverse opens up a number of challenges and opportunities. Already, gaming, media, and entertainment are a big component of the metaverse. It is only a matter of time before the banking, commerce and financial services industries jump onto the bandwagon.
A recent report by JPMorgan estimates the market and business opportunities for companies in the metaverse at over $1 trillion in yearly revenues. Incidentally, JPMorgan has become the first bank to arrive in the metaverse, opening a lounge in Decentraland, a virtual world based on blockchain technology. Here, one is greeted by a tiger and an avatar of the bank’s CEO Jamie Dimon. And, in Onyx Lounge, the bank’s lounge in Decentraland, one can buy virtual plots of land with non-fungible tokens (NFTs) or use cryptocurrency.
Similarly, KB Kookmin Bank, one of South Korea’s biggest financial institutions, is developing the KB Metaverse VR Branch Testbed. The move will enable customers to access banking services in the metaverse by wearing a head-mounted VR device. It includes virtual banking services and transactions, such as remittances that can be managed by a bank clerk. One-on-one consultations between customer and employee avatars will also be made possible.
Here are some of the numerous opportunities that the metaverse can present to the banking industry.
Building a competitive edge
While financial institutions are just dipping their toes into the metaverse currently, it could herald a total transformation in the way we bank. The metaverse could be an opportunity for traditional banks to compete against the challenger banks and recover lost ground from lagging behind on innovations around WhatsApp payments or embedded finance.
With many people now exploring the metaverse to spend time and make purchase decisions, financial institutions need to come up with facilities for these transactions, such as allowing conversion of fiat currency into metaverse’s cryptocurrency or extending loans.
Explore the NFT opportunity
A number of people are already transacting in the virtual reality space and investing in NFTs. NFTs could serve as a bridge between users and the metaverse, as they will enable users to facilitate identity during community and social experiences. They could also help identify ownership of digital products that exist only in the virtual reality space.
For banks, NFTs could become an asset class as part of wealth management. Banks and financial institutions have an opportunity to take it a step forward and launch mutual funds of NFTs, where the investment may appreciate.
Immersive experience for customer engagement
For customers who still prefer to visit a bank branch, banks can now offer an immersive round-the-clock banking experience in the metaverse. While not all banks may be able to fully jump onto the metaverse bandwagon, financial institutions can come together on the cloud and share resources, such as call centres. The voice-based call centres for customers’ grievance redressal may soon make way for metaverse avatars of bank officials.
What this means for customers is a 360-degree view without waiting in queue at the physical bank or on a call with the relationship manager. In the metaverse, customers will be able to have personalised chats with the bank personnel and offer access to all services offered by the bank.
Training and education
The metaverse is also proving to be a fantastic medium for training. KB Kookmin Bank plans to use its virtual branch to educate young people on finance, as well as train employees. For training purposes, banks can create customers and scenarios. One interesting use case is for banks to use the metaverse to teach their customers’ children good investing habits. Banks can create virtual currency on the metaverse, allowing children to create a saving habit, understand loans, etc. This will also help them retain customers and build loyalty.
Prepare for new age lending
Transactions in the metaverse need a secure medium. Financial institutions will benefit if they are able to predefine, develop and implement solutions that will serve all the crypto transaction and crypto investment needs. This will depend on many factors, including government regulations and a secure system.
At this stage, decentralised finance and Web 3.0 will help the decentralisation of data. While the underlying technology will be blockchain, it will allow individuals to have rights over their own data. Fewer intermediaries will be involved in transactions, and the cost of transactions will also come down.
This stage will also give way to a more collaborative peer-to-peer lending, and direct purchase and sale between two parties using blockchain and cryptocurrency.
The ongoing developments in software and hardware that will further improve the immersive experience leaves no doubt that metaverse is only going to attract more people. Financial institutions need to get their ecosystem in place to provide services on the this platform. Since transactions are already happening on metaverse, financial institutions must keep pace, and soon.