Founding Partner
The metaverse is a new frontier for banking. This digital landscape presents challenges and opportunities for banks looking to stay ahead of the curve. While some banks might shy away from the recent developments, even some big players like JP Morgan believe that getting in the metaverse early is worth the risks: “The asymmetrical risk of being left behind is worth the incremental investment needed to get started and to explore this new digital landscape for yourself.”
To adapt to this new landscape, banks will need to overcome seize upon opportunities and tackle challenges. However, the potential rewards are great, and the metaverse presents a unique chance for banks to grow and prosper.
Despite the challenges, there are many opportunities for banks willing to embrace the metaverse. JP Morgan and Bloomberg Intelligence estimate that the metaverse market will be worth $1 trillion in the coming years. In addition, a Zion Market Research study finds the metaverse is expected to grow at 39.5% CAGR (Compound Annual Growth Rate) up to $400.5 billion by 2028.
One specific opportunity presented by the metaverse is customer engagement. In the metaverse, banks have a chance to build relationships with their customers in a whole new way. They can create an immersive experience beyond traditional banking products and services. For example, digital banks that open virtual spaces like Quontic Bank did in May of this year will have the opportunity to interact with clients in three-dimensional areas. Aaron Wollner, Quontic’s chief marketing officer, had this to say regarding the limitations of current systems: “We love our digital, dot com experience, but it’s two-dimensional. It’s a little flat. We try and deal with it through chatbots and various forms of automation that extend that experience, but at the end of the day, it’s limited.” With the metaverse however, this can be greatly expanded.
Another opportunity lies in data collection and analysis. For example, banks can collect customer behaviour data in the metaverse to better understand their needs. This data can then be used to improve banks’ products and services. Additionally, this data can be used to create targeted marketing campaigns. Although, how much data will be available and the extent to which individuals are willing or able to share it is still to be determined.
Despite the challenges, there are many opportunities for banks willing to embrace the metaverse. JP Morgan and Bloomberg Intelligence estimate that the metaverse market will be worth $1 trillion in the coming years. In addition, a Zion Market Research study finds the metaverse is expected to grow at 39.5% CAGR (Compound Annual Growth Rate) up to $400.5 billion by 2028.
One specific opportunity presented by the metaverse is customer engagement. In the metaverse, banks have a chance to build relationships with their customers in a whole new way. They can create an immersive experience beyond traditional banking products and services. For example, digital banks that open virtual spaces like Quontic Bank did in May of this year will have the opportunity to interact with clients in three-dimensional areas. Aaron Wollner, Quontic’s chief marketing officer, had this to say regarding the limitations of current systems: “We love our digital, dot com experience, but it’s two-dimensional. It’s a little flat. We try and deal with it through chatbots and various forms of automation that extend that experience, but at the end of the day, it’s limited.” With the metaverse however, this can be greatly expanded.
Another opportunity lies in data collection and analysis. For example, banks can collect customer behaviour data in the metaverse to better understand their needs. This data can then be used to improve banks’ products and services. Additionally, this data can be used to create targeted marketing campaigns. Although, how much data will be available and the extent to which individuals are willing or able to share it is still to be determined.
Finally, the metaverse presents an opportunity for banks to reach new markets. With millions of people spending time in virtual worlds, banks have a chance to tap into this vast potential customer base. For one example, HSBC’s moves in the metaverse space this year speak to plans to reach new consumers and improve the customer experience for them and their existing customers. The bank’s Asia-Pacific Chief Marketing Officer, Suresh Balaji, had this to say: “The metaverse is how people will experience Web3, the next generation of the Internet – using immersive technologies like augmented reality, virtual reality and extended reality. At HSBC, we see great potential to create new experiences through emerging platforms, opening up a world of opportunity for our current and future customers and for the communities we serve.”
The biggest challenge that banks face when operating in the metaverse is security. This digital landscape is full of cybercriminals looking to exploit any vulnerabilities. To protect their customers, banks must invest in robust security measures.
They will also need to educate their customers on how to keep their information safe. In addition, banks will need to be proactive about identifying and thwarting attacks. In particular, the metaverse poses a unique risk in using avatars to interact and make transactions- identity verification will be essential in the virtual space.
Another challenge that banks will face is regulation. The metaverse is a new territory, and it is not yet clear how it will be regulated. Banks must stay current on the latest regulatory changes and ensure compliance. Failure to do so could result in hefty fines. However, when regulation does arrive, regulators will likely focus on the basics of financial regulation, like identity and anti-money laundering. The virtual world may be recent technology, but banks should approach compliance as they currently do.
Finally, banks will need to contend with the competition. In the metaverse, there is no shortage of companies offering financial services. To stand out from the crowd, banks will need to provide something unique that speaks to the needs of their customers.
The metaverse is a new frontier for banking. Though it presents some challenges, it also offers considerable opportunities for those willing to take advantage of it. By embracing this innovative technology, banks can open themselves up to new markets, improve customer engagement, and collect valuable data. However, they will need to undertake some security measures and stay compliant with ever-changing regulations. Those who succeed in adapting, though, will reap the benefits.
