The gaming, media, and entertainment sectors have already begun to spread into the metaverse, but this development is still in its early phases. However, the highly regulated and data-intensive banking sector needs to adopt this new platform faster. However, banks are now attempting to use the enormous potential that the metaverse offers.
Even though the banking sector entered the metaverse somewhat later than other sectors, it now has the chance to take the initiative because, since the pandemic, the usage of digital finance solutions and interactions has skyrocketed.
In Gartner’s report on digital transformation for finance organizations, nearly 70% of business leaders said that digital transformation projects are moving faster. They also said that by 2026, the industry in which their companies work will be “dramatically changed.”
The time and effort invested will also be worthwhile since, according to a recent JPMorgan research, businesses in the metaverse will have market and business potential worth over USD 1 trillion in annual revenues.
Some banks have joined the internet community. JP Morgan opened a Decentraland virtual lounge. South Korea’s largest bank, KB Kookmin Bank, is developing the KB metaverse VR Branch Testbed to provide financial services in the metaverse to teach and educate consumers. This year, HSBC joined The Sandbox to “create innovative brand experiences for new and existing customers” in the metaverse.
This new banking paradigm helps customers and banks. Retailers can sell things in the bank’s metaverse, including automobiles, clothes, furniture and even residences. In addition, customers could use “Buy Now Pay Later” and insurance to manage their finances. Gartner expects that by 2026, 25% of individuals will spend an hour a day in the metaverse for shopping, employment, and education.
Banks also use the metaverse to interact with customers more, which helps them find new customers and keep the ones they already have. Metaverse technology can offer immersive experiences like virtual training and development centers to help banking personnel build relationships with consumers and solve real-life banking problems.
Non-digital interactions have been declining across the business, according to PwC. So, the customer will have a new and different experience and won’t have to go to their bank branch to take care of money issues.
Traditional banks could use the metaverse to catch up to challenger banks and innovate. Making the most of the higher degree of trust they already have compared to new banks, as reported by EY, can be a concern regarding how transactions are done on this new platform. Banks will gain if they can design and deploy safe marketing and investment solutions.
These transactions require a security system. Blockchain will allow individuals to own their data and reduce intermediaries, lowering transaction costs. According to Deloitte, the banking sector is leading blockchain adoption, and global spending on the technology could rise from USD 5.3 billion in 2021 to USD 34 billion in 2026.
Banks are just learning about the metaverse. Be it fresh and exciting ways to engage clients or financial services that offer more choice and ease. However, it will take quite some time and work on the part of banks to be able to become a player in the metaverse. Their outdated technologies, marketing techniques, and business models must be completely redesigned.