There is no denying that the Coronavirus outbreak led to a widespread digitalization of numerous industry verticals. With the lockdowns resulting in a massive spike in online shopping, digital banking market observed significant momentum. As cash utilization has been diminishing rapidly, the development of advanced payment services has led to rapid digitalization of the overall banking process.
These technological marvels have allowed digital banks to be now equipped with real-time assistance, customized offerings, and shorter turnaround times. This has also ensured enhanced user experience, which in turn is boosting digital banking adoption across the globe.
Even cryptocurrencies have seen unprecedented growth lately, especially amidst the COVID-19 lockdowns. It has now become a trillion-dollar market with numerous tokens already in existence while new ones emerge every day.
Despite this, uncertainty around these growing assets meant that their outlook among financial corporations was not that forthcoming. But thanks to the rapid adoption of digital currencies in institutions and mainstream channels, banks and financial institutions are now looking to integrate cryptocurrencies into their business models.
Several similar technologies such as decentralized applications (dApps), NFTs, and the metaverse have been gaining traction lately. While each of these has the potential to revolutionize the financial sector, the most promising is the metaverse, with the virtual world expected to transform the entire banking operations, for both customers as well as financial institutions.
Metaverse – The future of digital banking
To simplify, the metaverse is a mixture of different technologies such as AR, VR, machine learning, artificial intelligence, and blockchain. These technologies combined can essentially allow people to interact effectively in a 3D virtual space.
Currently, the metaverse is predominately associated with the gaming sector, with devices like PSVR 2 and Oculus Rift as well as games like Decentraland already gaining significant popularity. It is worth noting here that the gaming industry is currently worth USD 300 billion, according to Accenture, and will continue to depict similar growth trends in the ensuing years.
This makes the banking sector the next frontier in the metaverse. With time, customers can visit banks through a virtual reality device, all without stepping out of their homes. Even major financial corporations are making heavy investments given the potential of banking in the metaverse, thus positively influencing digital banking market dynamics.
Seeing this opportunity, various banks are exploring their potential in the blockchain as well as the metaverse. Some financial technology startups are already specializing in this space. For instance, leading fintech company Acorns is offering an AR-based debit card that can be viewed through a smartphone.
Likewise, global banking corporations such as Citi Bank and BNP Paribas are making headways into the virtual world, with the latter even introducing a VR app in which customers can conduct operations virtually. Citi Bank, meanwhile, is testing holographic workstations for financial transactions.
South Korea-based Kookmin Bank already has a virtual branch that provides one-on-one consultations between employees and customer avatars. The latest financial behemoth to enter the metaverse is JP Morgan, which introduced its first virtual lounge called Onyx on the Decentraland world.
One of the key problems with metaverse is that the peripherals such as VR and AR are still at an early stage for mass production and usage. But like smartphones, it is expected that continuous R&D efforts will soon allow for the development of such peripherals that offer longer battery life, strong micro-processing capabilities, and high convenience, all at affordable costs, eventually transforming the overall digital banking marketplace.
What changes will the metaverse bring into the banking industry?
It is estimated that the metaverse has the potential to optimize the banking experience for people in various ways. While some of these will have an unprecedented impact, others will transform the customer experiences from behind the scenes.
- Enhanced user experience in a 3D environment
The metaverse will have an online virtual space through which customers will be able to transact, avail, as well as access banking information from the comfort of their homes. This is expected to streamline tedious processes such as loan applications and opening new bank accounts. Additionally, these virtual services could entice a new generation of users into the banking industry.
The ability to manage transactions and finances will emerge to be a primary highlight for ensuring an immersive and enhanced user experience in the metaverse, which in turn will pave the way for digital banking industry expansion in the upcoming decade. The metaverse will allow banks to reinforce connections with current customers that too in a more meaningful way.
2. The prospects of new products
Products that are aligned with the metaverse technology, such as NFTs, cryptocurrencies, and virtual goods have been receiving worldwide recognition. The deployment of virtual real-estate and NFTs will be a critical factor for the growth of the metaverse. Thus, banks will be required to accept cryptocurrency for customers to purchase and sell these products.
NFTs are already being displayed in an existing metaverse such as Decentraland, through which banks could potentially provide loans as well as accept tokens as collateral in the virtual environment. Banking institutions can also integrate NFT payment support by establishing a dedicated exchange point within the metaverse, which in turn is complementing digital banking market dynamics.
Meanwhile, virtual real estate is another asset that banks can look forward to. Virtual land spaces in meta-games like Sandbox and Decentraland are already being sold for millions. Citing a similar instance, Africa’s first metaverse called Africarare managed to sell 149 virtual plots in the first eight minutes of starting the sale online.
3. Fintechs to play a key role in metaverse banking
Fintech innovation has long been pushing to streamline financial services through online mediums. Since most financial technology companies are based on digital elements, they are expected to play a crucial role in metaverse banking, further establishing themselves as the future of finance.
It remains to be observed how much of a revolution will happen in the financial services sector. While legacy banking is still in the early stages of digitalizing with machine learning and artificial intelligence, the million-dollar question will be how much of an impact banking and transactions in the metaverse have on the overall banking structure. It would be interesting to see how the digital banking industry expands amidst these developments.