Banks Line up to Enter Metaverse over Fear of Missing out

Several consulting firms and analysts claim metaverse could represent a substantial new market for banking.

Recently, JPMorgan made headlines after becoming the first bank to set up shop in the metaverse. This step toward the virtual world raised many questions related to the role and impact of the Metaverse on the banking industry. It is a fact that every new technology comes with lots of benefits and risks, which surely puts people into doubtful situations. But what makes the metaverse interesting for banking is that these modern virtual worlds are built on top of blockchains, cryptocurrencies, and decentralized finance (Defi). They offer many exciting new opportunities.

For example, virtual real estate is one area where one could start seeing banks and credit unions offer services much like in the physical world, including credit and debit cards, mortgages, and loans. Hence, ignoring the sheer potential the metaverse and Defi have to offer could be costly for the financial institutions.

Bright future for Banking in the Metaverse

Several consulting firms and analysts claim metaverse could represent a substantial new market for banking with PwC estimating the global metaverse market growing from US$45.5 billion in 2019 to US$1.5 trillion in 2030. Goldman Sachs amps is even higher: a US$12.5 trillion opportunity, based on roughly 33% of the digital economy shifting to the metaverse and 25% market expansion. Morgan Stanley claims an US$8 trillion metaverse opportunity – in China alone. Bloomberg projects metaverse revenue opportunity to be US$800 million in 2024. You get the idea.

Banks in the metaverse will benefit from a host of new opportunities—from providing the payments rails that power transactions in the virtual world and reimagining transactions for a 3D world to engaging with employees in new ways, attracting young talent, and finding new, more human ways to connect and engage online with their customers.

Reinvent existing customer and employee experiences

Banks will be able to leverage AR and VR technology to create customer and employee experiences in 3D.

• Metaverse banking: Offering customers the ability to check balances, pay bills, make transfers and transact using AR / VR channels.
• Employee experiences: Delivering immersive learning experiences in the safety of simulated customer environments or onboarding remote workers in ways that create fun, connection, and a sense of community.

Standard Chartered Bank Hong Kong

The subsidiary of British multinational banking and financial services company, Standard Chartered Bank Hong Kong (SCBHK) recently became the latest major bank to embrace the technology of metaverse. As per TOI, the bank has partnered with decentralized virtual gaming company Sandbox for creating metaverse experiences. SCBHK acquired virtual land at the Sandbox metaverse's Mega-City district, a culture hub based on or inspired by Hong Kong talents. The bank announced the partnership on its website on April 25.

HSBC

In mid-March, Animoca Brands, the Hong Kong-based developer of the gaming environment The Sandbox, said that HSBC will acquire a plot of virtual land in its environment. Companies typically use land in The Sandbox to host games and contests. The Sandbox has been downloaded 40 million times and has 1.2 million active monthly users, according to the company. HSBC will use its plot to connect with sports, esports, and gaming enthusiasts.

The wave of new products

Latest products and technologies like cryptocurrencies, NFTs, and virtual goods will also rise once Metaverse comes into the mainstream. The implementation of NFTs and virtual real-estate will be an essential facet of the metaverse. And to purchase and sell these products, banks will need to accept cryptocurrency through on- and off-ramp methods.

NFTs are prominently displayed in existing metaverses like Decentraland, and banks can provide loans and accept NFTs as collateral in the virtual space. Banks can also facilitate payments for NFTs by setting up dedicated NFT exchange points in the metaverse.

Virtual real estate is another asset banks can latch onto. Already, virtual pieces of land in games like Decentraland and Sandbox are being sold for millions. Banks can provide business loans to customers for purchasing these virtual plots.