The concept of the Metaverse, a virtual universe where people interact and engage with digital environments, is rapidly gaining momentum. It is poised to become the default interaction environment for most people in the coming years, replacing the traditional internet as we know it. With such a transformative shift on the horizon, it is only natural to assume that the banking sector would be vying to establish a presence in the Metaverse. In fact, some prominent banks are already setting up their first Metaverse branches, even before the final form of the Metaverse has emerged.
Early Prototypes and Leading Platforms
While the finalisation of the Metaverse is still a few years away, early prototypes already exist in the form of leading blockchain-based virtual world platforms. Two of the biggest platforms in this space are Decentraland (MANA) and the Sandbox (SAND). These platforms offer more than just gaming; among their core features is virtual land that is tradable using NFTs and cryptocurrencies.
The Pioneer Banks in the Metaverse
Several major banks have already taken the bold step of establishing branches in the Metaverse. JP Morgan Chase Bank was the first to embrace this trend, opening its Metaverse branch in early 2022 within Decentraland. This move by JP Morgan marked a significant milestone, establishing the Metaverse banking trend among the leading banks.
Following JP Morgan's lead, HSBC opened its own Metaverse branch on the Sandbox blockchain gaming environment in March 2022. The Sandbox provides a creative space for users to build, own, and monetise virtual experiences. Similar to Decentraland, the Sandbox features tradable virtual land.
Soon after HSBC’s move, another major bank, the UK’s Standard Chartered, joined the trend in April 2022 by opening its first Metaverse branch, also within the Sandbox.
Switzerland, renowned for its banking sector, saw its first bank venture into the Metaverse in September last year. Sygnum Bank, positioning itself as the "world's first digital asset bank," opened a branch on Decentraland, choosing the virtual representation of New York's Times Square on the platform as its location. Sygnum's pioneering move comes as no surprise given the bank’s intense focus on digital assets.
Operating in the Metaverse
Banks that have joined the Metaverse banking trend typically acquire a plot of virtual land on major blockchain gaming platforms such as Decentraland or the Sandbox.
After securing their virtual plots, banks offer a variety of services to users within these virtual environments. These services may include account opening, trading, investment advice, and more; in short, most of the services you could get at a physical or internet-based branch. With Metaverse banking, users can interact with their banks through their virtual avatars, providing a more engaging and interactive banking experience compared to traditional internet banking.
Unique Opportunities for Banks
Bringing that personal touch back
Metaverse banking opens up unique opportunities for banks that go beyond what traditional online banking can offer. Over the last couple of decades, as digital banking replaced physical branch banking, the personal touch that many banks maintained with their customers has largely been lost. Metaverse banking can bring back that personal touch in a virtual setting. While the Metaverse is as far removed from the physical world as the internet, it offers interactive social communication opportunities that the internet largely lacks.
Imagine using your Metaverse avatar to interact and chat with your banking manager via their avatar – and avatars are going to be our primary identities for socialisation on the Metaverse. You could get product advice and have your enquiries answered, all while engaging in informal social chatter. Metaverse banking adds a social interaction factor that traditional internet banking has largely wiped out from the interaction between banks and their clientele. This engagement can help strengthen the relationship between customers and banks, contributing to higher customer loyalty and satisfaction.
Accessing new customer segments
Metaverse banking allows banks to expand their reach to underrepresented customer segments. Banks like JP Morgan and Standard Chartered have been losing potential younger customers to neo-banks and digital-only financial institutions for years. Metaverse banking is an opportunity to claw back the tech-savvy younger generation.
Gaining experience for the big thing
Lastly, by entering the Metaverse early and actively engaging with customers in this virtual environment, banks can accumulate valuable experience in trading and serving customers within the Metaverse. This experience will prove immensely useful when the big, pervasive, and more sophisticated Metaverse that everyone dreams of finally arrives. The banks that have gained product, investment, and customer service experience via their early Metaverse branches will be well-equipped to navigate the complexities of the future Metaverse, gaining a competitive advantage over late adopters.