Historically, traditional banking has relied heavily on brand reputation and its financial products to retain customers. However, businesses and individuals continue to embrace new technology in the third decade of the 21stcentury.
Together with new technology and the onset of the COVID-19 pandemic in March 2020, there has been a marked change in customer behavior. Customers are now more inclined to operate remotely and in the digital world. Consequently, traditional banks are facing new challenges when it comes to both their methods of interacting with clients and the products they offer. With these new expectations, banks will need to embrace and focus on the new digital wave known as the metaverse.
The metaverse (combining the words ‘meta’ and ‘universe’), is currently in development stage. Known as Web 3.0l, it is defined as a network of 3-D virtual worlds or a virtual reality space where users can interact with a computer-generated environment as well as other users. According to Gartner VP Analyst Marty Resnick, by 2026, 25 percent of people will spend at least one hour a day in the metaverse for work, shopping, education, social media and/or entertainment.
When it comes to banking, the metaverse provides a prime opportunity for traditional banks to compete against challenger banks. They can focus on recovering lost ground, resulting from lagging behind on innovations such as WhatsApp payments, as well as embedded finance. Banks also need to innovate in ways that will allow their customers to spend time in the metaverse and make purchase decisions, such as allowing the conversion of fiat currency into metaverse’s cryptocurrency, particularly when it comes to extending loans to customers.
Kumar Ghosh, who is a software engineering director at a Fortune 100 Bank believes that in the future, multiple financial transactions will happen in metaverse. “These transactions,” he says, “will be mobile, frictionless, cashless. They can even onboard a customer or verify their identity. That’s one reason why there is a call for banks to create an unparalleled customer experience. Banks that can use cutting edge technologies like virtual reality (VR) to create a realistic and immersive environment for their customers will be able to provide an unbeatable service and will win the race.”
The importance of an immersive customer experience
Forward-thinking banks can create a powerful, immersive customer experience within the metaverse space by utilizing the cloud and sharing resources such as virtual call centers to address customers’ requests. While it may sound like something out of science fiction, ultimately, banks will be able to create avatar representatives and officials in the metaverse, thereby allowing customers to have personalized chats with bank agents and access in one place, in real time, to all their financial institution’s services.
This, in turn, will provide a whole new experience for customers: offering them a 360-degree view of their financial institution without them ever having to physically set foot in a physical bank.
Exploring NFT and cryptocurrency opportunities
Cryptocurrencies, virtual credit cards and non-fungible tokens (NFT), will be the new currency in the metaverse. They are an integral part of Web 3.0 and will go hand-in-hand in this virtual new world. Banks will be able to take advantage of this by recognizing that NFTs provide a potential asset when it comes to wealth management, particularly in launching mutual funds where investments seem promising.
According to Forbes, as more and more people embrace the metaverse and cryptocurrencies, banks and financial institutions will be investing time and energy in facilitating cryptocurrency or blockchain-derived financial models, especially when people will want to send money to others without the current, traditional banking fees that exist.
With cryptocurrencies already finding their way into public usage (both Paypal and Mastercard already utilizing them), there are already discussions being undertaken on how to regulate cryptocurrency in the metaverse. However, Publicis Sapient, argues that rather than wait for regulation, banks should already embrace the metaverse economy, and they should do so by leveraging trust and brand recognition (as Paypal and Mastercard are currently doing); embrace metaverse payment platforms (such as Meta’s WhatsApp transactions); and start integrating with VR and augmented reality (AR) platforms, particularly as many people already are comfortable utilizing these things in sports or gaming environments.
The need to create a trusted banking environment
While the possibilities for banking in the metaverse are exciting, nonetheless, banks should proceed with some caution. Trust is the number one issue people look for when it comes to both choosing their financial institution and ensuring that their funds and their identity are safe. Creating trust in the banking metaverse is crucial.
Security has always been a team sport. No single vendor, product or technology can go it alone when it comes to protection. The culture of information sharing and collaboration in the security community that currently exists is a monumental achievement, but it did not happen overnight.
Identity theft is always where intruders strike first. There are already plenty of sophisticated phishing scams when it comes to financial institutions, and over time people have been warned about what to look out for. In the metaverse, phishing scams can potentially take on entire new realms. No longer will someone receive a fake email that appears to be from their financial institution telling them to please reset their password. Rather, customers could find themselves speaking with a hijacked avatar of a teller in their virtual banking lobby asking for their personal information. Or someone impersonating the bank’s CEO could invite a customer to a meeting in what turns out to be a malicious virtual conference room.
Consequently, banks, along with other institutions must invest time and energy and manpower in solving these identity issues in the metaverse. It must take top priority. Constructive steps that financial institutions can undertake to achieve this, include creating multi-factor authentication (MFA) and password-less authentication integral to platforms. Banks can also build on recent innovations in the multi-cloud arena, where IT administrators can use a single console to govern access to multiple cloud app experiences that their users rely on.
Getting ready for the future
While there are still issues that need to be addressed, the metaverse is the future, and banks can truly benefit from this up-and-coming technological innovation by getting in on the ground floor. Doing so, will allow banks compete on a par with other more-forward thinking institutions. The time is now. The coming metaverse is an opportunity for banks to radically alter the way they currently do business, and both retain and recruit new customers.
Finally, financial institutions should embrace the coming metaverse as leaders, rather than followers, particularly at this early stage. It is the perfect opportunity for them to create the future of metaverse banking on their own terms.
About the Author: Poonam Garg is an engineering leader at a Fortune 10 Fintech company, who has 12+ years’ experience in IT. Her technical skill sets include multiple scripting languages, programming languages, web technologies, Java frameworks, relational databases, operating systems, open-source tools, cloud technology, security tools, engineering architecture and more.