Why Banks Need to Embrace the Metaverse: Shaping the Future of Banking
The Power of Technology in Shaping the Banking Sector
Technology has always had the ability to shape jobs, economies, industries, and lives. The banking sector is no exception to this. Throughout history, early adopters of technology have thrived while others have faded away. The banking systems of both the world and India recognize the importance of technology and have been open to embracing innovations such as the Metaverse and virtual realities.
The Rise of the Metaverse: A Virtual Reality Revolution
The Metaverse is a virtual reality supported by various sub-technologies such as augmented reality, virtual reality, mixed reality, blockchain, cryptocurrency, NFTs, and digital twins. It has been gaining public attention as one of the most significant technological advancements in recent years.
The Growing Base of Metaverse Users in India
Indian youth form a rapidly growing base of Metaverse users and enthusiasts. Recognizing this, banks understand the need to leverage the virtual environment to cater to the digitally inclined customer base. By extending their offerings to decentralized platforms and communities, financial institutions have the opportunity to expand their customer base and stay ahead in the digital landscape.
Cryptocurrency and Its Impact on the Banking Sector
The emergence of blockchain and tokenomics has given rise to a new form of currency – cryptocurrency. Cryptocurrency can be traded, invested, or transacted by holders and enables the purchase of virtual assets such as NFTs and engagement in virtual gaming. With cryptocurrency, users can bypass traditional banking intermediaries, which poses a challenge for banks. In India alone, the number of cryptocurrency users is projected to reach 328.70 million by 2027.
Adapting to Changing Customer Expectations
The rise of fintech startups and the launch of super apps by banks have changed the traditional practice of visiting physical bank branches for every minor concern. With the introduction of cryptocurrency, banks have even more reason to cater to the digital requirements of young customers. In a groundbreaking move, JP Morgan Chase, the largest bank in the US, opened a lounge in Decentraland, a virtual metaverse, and released a white paper to educate its customers about this new digital space.
Indian Banks Taking the Lead in Metaverse Adoption
The Union Bank of India and Punjab National Bank (PNB) have become pioneers in the adoption of the Metaverse in India. The Union Bank of India launched Uni-Verse, a Metaverse virtual lounge and open banking sandbox environment, to engage with new-age customers and explore new business avenues. PNB also launched its virtual branch, PNB Metaverse, to enhance digital experiences for its Gen Z customers. These initiatives demonstrate the banking sector’s recognition of the importance of the Metaverse in restoring customer engagement and personalized interactions.
Metaverse Use Cases in Banking
Virtual branches have emerged as the preferred initiative of banks looking to leverage the Metaverse. Deloitte identifies several use case clusters, including virtual branches, immersive advisory services, gamification, marketing and eminence, community building, training, and digital twins. Additionally, banks can leverage the Metaverse for services such as fund withdrawals from virtual ATMs, customer care services, virtual appointments with advisors, real-time house tours, discussion and purchase of financial products, virtual event attendance, and virtual assistants.
The Future of Metaverse Adoption in Banking
Although the Metaverse is still in its early stages, its potential for growth and innovation is undeniable. However, it is crucial to establish governance structures and guidelines for extending banking services into the Metaverse. Banks must find a balance between the virtual and physical banking worlds to ensure a seamless customer experience. Despite concerns such as data breaches, money laundering, and fraud associated with the Metaverse, banks will continue to explore opportunities to embrace this evolving technology and reshape the concept of physical banking.
As the world moves towards a more digital future, banks must adapt to meet the expectations and preferences of the future generation. Embracing the Metaverse is not just a trend; it is a necessity for banks to stay relevant, engage with customers, and provide innovative financial solutions. The Metaverse has the potential to redefine the banking industry and shape the way we interact with financial institutions in the years to come.