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