Practical Guide to Implement Metaverse Banking
By 2027, 40% of large organizations worldwide will use a combination of Web3, AR cloud, and digital twins in metaverse-based projects aimed at increasing revenue- Gartner.
With the advent of Web3, Metaverse has the potential to revolutionize the banking industry. The term "metaverse finance" (MetaFi) refers to a combination of traditional finance (TradFi), decentralized finance (Defi), and centralized finance (CeFi), with new products designed especially to address the specific requirements of the new ecosystem in the banking sector.
Metaverse platforms are built on top of different types of technologies like blockchains, cryptocurrency exchanges, and non-fungible tokens (NFTs). Land and collectibles are virtual digital assets represented as NFTs and traded using cryptos, while blockchains serve as the digital proof of ownership for these assets. Early adopter banks are dabbling with modules/POCs to create private metaverse-based services for some use cases.
Few Use cases of Metaverse in banking are :
1. Metaverse branch/outpost - customers could open opportunities for banks to boost their revenue by doing innovations around the metaverse use cases.
For example :
JPMorgan, the largest bank in the United States, has become the first lender to enter the Metaverse, opening a lounge in Decentraland, a virtual world based on blockchain technology.
2. Virtual banking products - Cryptocurrencies, NFTs, and other virtual assets have become more prevalent in the metaverse world. In the Metaverse, banks can offer products like loans on virtual real estate and accept NFTs as collateral. Banks can also facilitate the payment of NFTs by setting up specific NFT exchange locations in the Metaverse.
Quontic is the first bank to give bitcoin rewards on checking accounts, the first to provide a wearable payment solution, and is now the first to establish an outpost in the Metaverse. Quontic's Bitcoin Rewards Checking program provides customers with a debit card, surcharge-free ATM access, mobile app, ApplePay, GooglePay, SamsungPay, Zelle peer-to-peer payments, and more - all with no monthly service fee.
3. Metaverse CX - Banks can use the Metaverse to provide a largely immersive, round-the-clock banking experience. They can design virtual spaces within a metaverse branch where avatars of relationship managers and customer advisers, for example, can deal with high-net-worth individuals one-on-one. For customers looking for complex solutions and high-touch services from banks, Metaverse can provide personalized services such as product suggestions like business loans, student loans, etc.
For example, One of South Korea's largest financial organizations, KB Kookmin Bank, has entered the virtual world by creating the KB Metaverse VR Branch Testbed. Banking customers can communicate with financial advisors using virtual reality to get personalized services.
Metaverse Banking Projects
One of the world's largest international banking and financial services companies, HSBC, and The Sandbox announced a partnership that will give virtual communities around the world a chance to interact with other virtual communities and the sports communities in "The Sandbox metaverse."
American Express, a multinational corporation specializing in payment card services, is willing to provide real-world services such as card payments, ATM services, banking, and fraud monitoring services to customers in the Metaverse.
BNP Paribas Retail Banking in France (BDDF) has launched a virtual reality application that gives customers a glimpse into the banking future. It demonstrates how customers can use augmented reality to check their banking operations, such as account activity and transaction histories, or buy property through their bank.
"In addition to its potential for product and service innovation in payments, investments, insurance, and loans, the metaverse provides a chance for banks to develop deeper customer connections"- Accenture.
Opportunities for the banks in the Metaverse
-Banks can extend their role as custodians of their customers' assets to the Metaverse by securing, insuring, and lending against cryptocurrency and NFTs. In the Metaverse, the digital currency may take on new meaning as users can pay in cryptocurrency. Adding on-ramp cryptos will allow consumers to accept fiat payments to purchase NFT or other crypto assets directly in metaverse banking.
- Metaverse will provide opportunities for banks to strengthen their brands and market their financial services. HSBC's investment in a piece of land in The Sandbox to interact with sports, e-sports, and gaming enthusiasts, is an example of a metaverse branding strategy. The bank stated that its collaboration with -Sandbox would enable it to develop innovative financial products.
-Retail CBDCs, which various central banks are considering around the world, could be used in the Metaverse similarly to cryptocurrencies and tokens. Metaverse is likely a use case for CBDCs, as governments look to establish outposts in the Metaverse for services.
Recently, India's central bank- Reserve Bank of India (RBI), launched E-rupee, the central bank digital currency (CBDC), for retail transactions on a pilot basis in four cities.
According to the central bank, "customers can transact with e-Rupee through a digital wallet provided by banks and stored on mobile phones and devices. Person-to-person (P2P) and person-to-merchant (P2M) transactions are both possible (P2M) through e rupee. QR codes displayed at merchant outlets can be used to make payments to merchants. "The e-R would have physical cash characteristics such as trust, safety, and settlement finality. As with cash, it will not earn interest and can be converted to other forms of money, such as bank deposits."
Benefits of implementing Metaverse in Banking
-By 2030, 47% of bankers believe customers will use augmented reality (AR) / virtual reality (VR) as an alternative channel for transactions. Banks can provide 3D experiences to their customers using AR and VR technologies.
-With the addition of on-ramp cryptos, customers can accept fiat payments to purchase NFT or other crypto assets directly in metaverse banking. Banking customers can exchange real-world currency for cryptocurrency coins and spend cash on digital assets. On the other hand, individuals can spend cryptocurrency on something present in the real world that isn't available through the Metaverse.
-Metaverse can deliver immersive banking experiences through simulated customer environments and remote onboarding that brings fun, connection, and a sense of community.
-Metaverse relies on an open, decentralized system that will enable the creation of a chronological, decentralized interbank ledger. Banks can verify the result of the KYC verification process that has already been conducted for a customer, thus avoiding the need for conducting redundant KYC verifications.
Metaverse can bring changes in the banking sector, influencing how banks can engage with customers, invent new products and enable services. Banks can use digital avatars to improve customer support systems in several ways by delivering a more intimate and personalized experience that deepens customer engagement.
With the increasing real use cases, Metaverse can help financial institutions in payments, especially with on-ramp and off-ramp capabilities.
How should banks prepare for Metaverse banking?
Banks can start preparing for offering services in Metaverse by building a system of engagement in line with the Metaverse principles i.e.
1. Embeddable Digital Avatars/digital humans
2. Voice bots based on banking-specific NLU/NLP, ASR & TTS
3. Strong remote onboarding/ eKYC system
4. Omni digital wallet capable of handling multiple payment rails
System of engagement with real-time personalized recommendations
Talk to us to see how BankBuddy is helping banks execute their Metaverse vision