The term “metaverse” is just over 30 years old, and as a relatively new concept, it started gaining popularity very recently. Viewed by the industry as a new source of never-before-seen monetization, it has potential across the finance domain
In this blog post, we’re going to explore the role of the metaverse in today’s financial environment, the expectations of the major world banks from it, and the potential of this part of digital transformation that is set to be enabled across financial services in the nearest future.
What is Metaverse, and How Has It Gained Its Popularity?
The term “Metaverse” never existed before 1992, when Neal Stephenson coined it to describe an alternative 3D-connected reality in his novel “Snow Crash”. If we fast-forward to 2021, we will see that Facebook rebranded its parent company to Meta and then invested over 10 billion dollars into the infrastructure (hardware, software, services) to support.
Since then, the volume of Google results for the term “metaverse” has skyrocketed.
Back in the 90s’ of the previous century, you had to go inside the bank to manage your money. Then ATMs came into play, alongside debit and credit cards, and electronic payments, and the banking industry seemed to get more and more affected by digitalization, wave by wave.
Nowadays it seems like your usual routine of interacting with banks will take place in a virtual space: every operation from entering a bank branch to committing a payment using digital currency will come true through banking in the metaverse.
At least that’s what Bank of America, JPMorgan, and Goldman Sachs believe in with these investment banks seeing metaverse as an 8 trillion opportunity in revenue and monetization side. Let’s try to figure out what these beliefs are built on.
What is the Role of Technology in the Financial Sector?
Metaverse is a 3D web-powered space that enables users to interact in virtual surroundings thanks to Augmented and Virtual Reality (AR and VR). Any activity given to users in a digital universe is available. This is the place that combines hybrid and digital space in itself. Metaverse consists of digital items, avatars, and NFT-based surroundings.
While some claim that the metaverse is the new iteration of the Internet and Social Media, we are not making any loud statements, and trying to figure out which business opportunities it has to bring.
First of all, finance is third in domains accepting new opportunities of the metaverse, behind IT and education enterprises. By March 2022, 11% of world enterprises have invested in it.
Leading business sectors worldwide that have already invested in the metaverse as of March 2022
Source: statista.com
The most obvious opportunities for the banking and financial companies in the metaverse include but are not limited to:
- taking ads to a new level as 3D technologies create a marvelous environment for storytelling and promotion
- creating events that are non-existent in any other environment.
- bringing together people across different physical territories
- supporting digital wallets and other services that enable enterprises to regulate transactions within the ecosystem.
Banks’ Representation in Metaverse
In theory, the metaverse is promising. But are banks ready to put their money where the mouth is? It seems that the answer to this is “yes”. As for the estimations, Cathie Wood, the founder and CEO of Ark Invest, claimed that “the metaverse will be a multitrillion-dollar market” back in 2021.
Bank of America strategist Haim Israel stresses that the metaverse is a “massive opportunity” at least for cryptocurrencies.
As for the real-life digital space representations, there are some examples to throw in.
JP Morgan
JP Morgan is an American banking giant, and they’ve introduced Onyx Lounge to increase customer’s interest in their Ethereum-based services. The bank is focused on building the system to provide banking services in the virtual space to the extent they do in their physical branches.
They double down on their pursuit of new technologies, and their trust in metaverse development is seen in their report on the matter. They claim that metaverse offers opportunities to transact (54 billion USD spent on virtual goods), socialize (60 billion messages daily on Roblox), create (with opportunities to earn for virtual space creators), own (in regards to NFTs with a gigantic market capitalization), and experience (creating partnerships with enterprises).
Onyx Lounge by JP Morgan
Source: forbes.com
The project still exist in 2024, their blockchain processed over $1 trillion in notional transactions, and handles up to $2 billion in transactions daily. The biggest news in regards to it was opening up to third-party applications.
HSBC
This British bank is the biggest one who was interested in the partnership with the biggest gaming metaverse out there: The Sandbox. They were looking for opportunities to partner with e-sports and gaming enthusiasts who “live” in the Metaverse.
“Through our partnership with The Sandbox, we are making our foray into the metaverse, allowing us to create innovative brand experiences for new and existing customers,” – Suresh Balaji, CMO at Asia Pacific of HSBC commented on the partnership.
This cooperation seems like a win-win opportunity as The Sandbox creator Sebastien Borget was more than happy to cooperate with “the large, trusted institutions”.Some of the other major brands also push their offers to the customers – Adidas, Gucci, and Warner Music Group to name a few.
If you’re looking for opportunities to offer your product (that has potential in metaverse) to the leading financial organization in the world, but lack software development capabilities, contact Elinext to get a free quote on your project. We have tons of experience in the financial sector and have seasoned professionals with extensive experience in the field.
Top Metaverse Benefits for Businesses in the Finance Domain
For different types of businesses, metaverses are ready to offer various benefits. It is still “terra incognita” in many ways, but here is what financial organizations pursue when they enter the Metaverse game:
Engagement Level Increase for the Users
There are new possibilities for interaction with your bank for users if it happens online. By introducing the Metaverse experience to their customers. The concept of gamification has existed for a long time, and now it is available for presentation in a nice environment of AR/VR showrooms.
New products are easier to pitch, and some virtual goods that never existed outside of the metaverse could be pitched—more on that in the next section.
Virtual Event Opportunities
Organizing a tech company or banking meetup is quite a challenging task that requires lots of resources. Virtual events for the customers give them some sort of feeling of presence while not spending too much to organize the offline event.
As it is a metaverse an NFT avatar exhibition itself at a random event creates opportunities for creators and some sort of brand leverage for the existing customers.
Leverage Trust and Brand Recognition
Traditional banks are among the institutions trusted the most by the customers. Their involvement in Web3 events, crypto, and digital assets adds credibility to it while keeping customers within the existing network and their brand.
Metaverse is a great way to dive into the crypto game while offering more traditional banking services: mortgages, loans, and others.
Showcase New Products
Financial institutions can also set up stores and showcase their products and services virtually, with the possibility of targeting a large number of new customers. With new opportunities for storytelling and presenting the products in an AR environment, customers have fewer chances to remain passive listeners and are easily pushed to commit certain lucrative sanctions for service providers.
Easy Transactions
There is no easier way to spend digital currencies than in digital environments. Users don’t need to link bank accounts in the Metaverse world and the payments are easily committed.
Conclusion
While assessments of the metaverse potential made by the leading financial institutions a couple of years ago have been exaggerated, the metaverse still presents itself as a new opportunity to tackle for banks and other financial organizations.
Leading banks invest in their presence in the metaverse to tackle new groups of customers and promote their products and services in the never-before-seen setting.
If your financial organization needs to strengthen its software development capabilities in an AR/VR setting, don’t hesitate to contact Elinext to discuss the potential partnership.
