Banking in the Metaverse: real deal or pointless Web3 use case?
One of the most popular buzzwords in the Web3 world – “the Metaverse” – has recently caught the attention of banking firms around the world. But why? Banking, a realm that is relatively conservative and unwilling to innovate, has been pushed to break this stereotype because of successes in the internet and mobile arenas.
Banks are flocking to the Metaverse
When having a digital webspace became a necessity, banks started developing and releasing website portals permitting clients to interact with their accounts, apply for loans, make transactions, and go through quick financial analyses.
This was followed by the pioneering of mobile banking by fintech firms. This process made banking processes mobile and allowed clients to use their credit cards to withdraw at any ATMs with minimal fees. Due to its massive success, all banking firms now have a mobile app granting the same commodities.
The term Metaverse was coined in 1992 by the science-fiction author Neal Stephenson when referring to a highly immersive digital space that meshes physical habits with digital life. Since late 2021, Mark Zuckerberg has been propelling this word into fame by renaming Facebook into Meta and betting his company’s future on the premise.
Thanks to this, companies such as Microsoft, Nvidia, and even Shopify have made huge investments. This has allowed the Metaverse to garner a massive audience, and is regarded by many as the future of all online business and economics. It was valued at around $40B in 2021 and is projected to grow to $1.6T by 2030.
Seeing these statistics, banking firms have decided that missing out on this trend would be another foolish misstep in keeping up with trends.
Metaverse & banking system use cases
Proceeding from this standpoint, JP Morgan decided to take the first step into the Metaverse by opening its Onyx lounge in Decentraland. As a result, a chain reaction of banks flocked to the Metaverse to try and stay ahead of the competition.
Other banks such as SCB, HSBC, CaixaBank, Standard Chartered, Union Bank, Hana Bank, CBI, and Warba Bank are opening their own digital spaces. These spaces not only serve visual cosmetic purposes but also serve practical uses.
For example, Hana Bank has constructed a business model that will provide clients with banking services in the Metaverse, such as ATM withdrawal, deposits, loans, and more.
NatWest took another approach to garner a spotlight in the Metaverse by hosting a virtual event called “Portrait of Success,” during which a gallery was hosted on spatial.io, showcasing 30 images of female entrepreneurs in a diverse range of businesses. American Express filed several patents to provide real-world services in the Metaverse.
While it’s inspirational to see banks taking action and trying to adapt to newer generations, it’s hard not to question the value of these investments. Thanks to mobile applications and websites, we got access to our information and quick customer support without the need to stand in long lines or commute just for a quick metrics sheet. What do clients have to gain from the Metaverse?
As the banks tell it, digitizing banking spaces allows for “improved customer experiences.” In reality, most users report poor user experiences and leave comments on digital space’s lack of visual pleasantry. With that in mind, it is clear that investments in the Metaverse were less client-oriented, but rather more focused on maintaining influence.
One of the main reasons for banks to invest in the Metaverse is to try and hold onto the “first-mover” advantage, as after their loss to fintech companies, banks cannot afford to get outshined again.
Another obvious reason is marketing. Visa purchased the CryptoPunk 7610 in August 2019 just to showcase their awareness of NFT and Web3.0. The JP Morgan Onyx lounge is also just a fancy billboard put within the view of all players who log into The Sandbox.
Yet the leading and most logically sound reason for investment into crypto is technological trademarking. Since the Metaverse is a new and innovative idea that might become the centrepiece of all commercial, social, and economic activities, financial corporations can provide the technological foundations necessary to uphold this massive infrastructure in a safe and efficient manner.
Mastercard is a perfect example of startup investment done right as the firm has backed companies such as Coinbase, CoinDesk, Kraken, Lightning Labs, Circle, Ripple, and Grayscale.
These organizations have continued to be competitive in the virtual economy. Mastercard has been so happy with the successes of these startups that they’ve released a three-month program called Start Path Crypto that helps crypto startups scale at a steady and healthy pace. Visa has done something similar by educating entrepreneurs on NFTs with their own creator program.
Final Word
What are the odds of banking in the Metaverse succeeding? With an objective look at these digital spaces owned by banks, “degrading” is the only word that comes to mind. Instead of upstanding rich buildings with airtight security and a sense of secrecy, we are given a poorly animated tiger roaming around a poorly designed digital space.
How are clients meant to maintain their trust in their mature and dependable banks when their metaverse offerings are juvenile and halfhearted?
Most of these banks have to take an honest step back and look at the bigger picture rather than tunnel visioning on the idea of appealing to children and teens. The target demographic for banks in the Metaverse should be investors and creators, not players and adventurers.
Investing sums of up to $280,000 in “virtual real estate” just to attempt to replicate the feeling of a physical bank in the digital realm seems myopic and hollow. Will it amount to any real profit?
