Banks Jump on the Metaverse Bandwagon


Banks from around the world are actively exploring the opportunities presented by the metaverse, buying virtual land and establishing a presence on popular platforms. They believe these virtual environments will help them better connect with younger customers, collaborate with partners and train employees, a new analysis from fintech-focused research firm WhiteSight shows.

The analysis, released August 25, 2022, details the key steps established banks and financial institutions have taken and outlines the various ways they have engaged in the Metaverse, including land acquisitions, trademark and patent filings, and more.

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First, many banks are buying land and virtual properties on popular platforms like The Sandbox and Decentraland, the report says, a move that should generally allow them to establish a presence.

Reuters

JPMorgan was an early mover, opening its Onyx Lounge in Decentraland in February 2022. This was later followed by HSBC, which in March acquired a lot of virtual real estate in The Sandbox to connect with sports, e-sports and gaming fans. Standard Chartered was next, also buying virtual land in The Sandbox in April to engage with “customers, partners, employees and the tech community to explore co-creation opportunities.”

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Industry players are also actively seeking intellectual property (IP) protection, the report said, citing the example of Mastercard, which filed 15 non-fungible token (NFT) and Metaverse trademark applications in April 2022 to upgrade its payment processing system to expand the new virtual economy.

Similarly, the filings suggest that American Express is attempting to make its real-world payment services work in the metaverse. The registered trademarks indicate that the company is considering offering card payments, ATM services, banking services and fraud detection to customers in virtual environments.

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Bank training and skills development programs are also beginning to take shape in the virtual world, the report notes. In South Korea, Hana Bank last year opened a virtual training center on Zepeto, an avatar app powered by Naver, the country’s largest internet company. Bank of America introduced a new virtual reality (VR) training program in October 2021, allowing approximately 50,000 employees to practice a range of routine to complex tasks and simulate customer interactions in a virtual environment.

Metaverse Banking: Partners and Activities, Source: WhiteSight, 2022

Metaverse Banking: Partners and Activities, Source: WhiteSight, 2022

Reach younger target groups and enable new business models

The metaverse, a concept that refers to a shared virtual environment that people access over the Internet, has emerged as one of the hottest business trends of the past two years.

According to McKinsey and Company, corporations, venture capital and private equity firms invested more than $120 billion in the Metaverse in the first half of 2022. The sum is more than double the $57 billion invested throughout 2021 and shows continued investor optimism about the sector’s prospects.

The consultancy estimates the metaverse could grow to be worth $5 trillion by 2030, with e-commerce becoming the largest economic force ($2.6 trillion), ahead of sectors like virtual learning ($270 billion). dollars) and advertising ($206 billion) and gaming ($125 billion).

For banks, the metaverse represents a huge opportunity to attract young or new customers, improve the customer journey and develop new products, says Chappuis Halder, a management consultancy part of Capgemini Invent.

An exciting business model made possible by the Metaverse is play-to-earn. With play-to-earn, players can receive their in-game earnings back as real cash or transfer them to other games, players or platforms via cryptocurrencies. This essentially means players can use their in-game items to buy, sell, and trade digital assets worldwide, creating brand new financial ecosystems, according to the company.

In this scenario, banks could support marketplaces in creating, owning and exchanging digital assets and connecting these marketplaces to the traditional economy and fiat currencies, it said.

Health-to-earn is another promising area. These games typically combine play-to-earn, NFTs, and GPS technology to track users’ movements and health activities. Data is stored on a blockchain and converted into rewards, typically in the form of cryptocurrency. These rewards are earned by completing in-game tasks such as E.g. finishing a workout, walking, cycling, running and so on.

Financial institutions could leverage health-to-earn, allowing their employees to play fitness games in the Metaverse, be rewarded with crypto tokens, and collect crypto earnings for their medical reimbursement accounts (MRAs), for example. For insurance companies, they could develop specific offers that reward healthy behaviors by promoting better coverage, premiums and health using gamification, says Chappuis Halder.

Photo credit: freepik

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