Joy Macknight

Setting up virtual branches may be the beginning, but there is so much more to the metaverse that banks need to explore.

The hype around banks’ forays into the metaverse world continues to mount as more institutions jump on the bandwagon. As well-documented in Kimberley Long’s April cover story, ‘Banks’ experiments in the metaverse’, many have bought real estate on different platforms and opened virtual branches.

For example, JPMorgan acquired a property in Decentraland, HSBC in The Sandbox and, more recently, Nedbank established a village in Ubuntuland in the Africarare metaverse.

But is setting up bank branches or customer support desks the right way to engage with the complex and multi-dimensional metaverse world, which is still being defined? Jeeva Moni, financial services technology consulting partner at EY, thinks not.

“The state of some branches and customer contact points looks quite dull, to be frank,” he says. “They should look at closing them down – it’s been a very fast fail.”

However, standing on the sidelines is not a strategy for the future. Mr Moni points to the swelling number of crypto-native, Generation Z customers and employees that banks need to engage with. “These folks won’t walk into branches and open an account, so there is a desperate need for banks to engage with the next generation of crypto-natives coming into the customer segment, but also on the employee side as well,” he says. “This population is the emerging market which banks need to target.”

Looking to engage the younger demographic, CaixaBank’s digital bank imagin launched virtual venue imaginLAND on Decentraland in April; the design is based on imagin’s cultural space in Barcelona. imaginLAND launched with a concert by Marlon, a Spanish pop artist, recorded in multi-camera format, which could be viewed by registered imagin users as an immersive experience in the metaverse.

Beyond engagement, banks need to be relevant as the “financial fabric” in the metaverse ecosystem, according to Mr Moni. “How will money flow within the virtual world? How will it flow between different currency types, whether between cryptocurrencies and central bank digital currencies, crypto and fiat, and so on? Could there be other kinds of tokenised models? There are a number of dimensions to how this is going to be replumbed and banks have to get involved – they have the power, the transactions, to influence the outcome,” he says.

banks have to get involved – they have the power, the transactions, to influence the outcome

Jeeva Moni

As such, he believes that banks need to be more ambitious than simply opening branches and instead develop new products and offerings that don’t yet exist today. “We might not have the products in the physical world because we don’t need them, for example something as simple as insurance for a crypto wallet. These are the business use cases which are tapping into the emerging market of customers,” he adds. “But to understand this new customer segment, you have to be part of one of these decentralised autonomous organisations, see how they behave and see how they act as a group.”

He also points to “no regret” use cases, such as improving learning and development (L&D). He says: “L&D is a good use case. Banks need to refresh the way they discharge learning through shorter, snappier, more visual-based, easy-to-digest content, rather than the traditional ways of long videos and hundreds of PowerPoint slides. This doesn’t work with the new generation.”

Interestingly, in September, Singapore lender DBS bought a plot of land in The Sandbox to launch a metaverse experience showcasing environmental, social and governance (ESG) ideas and initiatives. The bank will use the platform, DBS BetterWorld, to profile social entrepreneurs in Asia who have been driving positive impact through innovative business models, as well as educate customers on the importance of building a more sustainable world.

In terms of other use cases, Mr Moni believes that banks should play a much more active role around digital identities and interoperable identities. “We still trust our banks and entrust them with our money. So, can they play an active role in creating a much safer metaverse and Web3 ecosystem?” he asks. “We have not figured out how to create interoperable digital identities in the current world. Maybe some interesting ideas around managing digital identity will come out of the metaverse, which we can then bring back into the physical world.”

Data is another issue that experiments in the metaverse may help to solve, according to Mr Moni. While every bank sits on a mountain of data, monetising it has proved elusive due to the challenge in sorting through the data mess. “The amount of data that the metaverse, Web3 and Internet of Things are going to create will make the current data mess look like a teacup compared to the Pacific ocean,” he says. “Wait another five years and we will need a different approach for tackling the data tsunami that’s going to hit us."

“Therefore, solutions around trust and data could be the interesting ones that come out as a byproduct of the metaverse journey which we can benefit from,” he adds.

Despite the hype, banks should get involved to help shape the future of the metaverse. As Mr Moni says: “If they don't get involved, then the metaverse world is going to be shaped by the general public and other players, and their voice will not be heard.”

Joy Macknight is editor of The Banker. Follow her on Twitter @joymacknight

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