People are using avatars to develop businesses and have fun in virtual worlds, such as Second Life. Karina Robinson reports on the growing response from banks and the potential they could tap.
Banks are formal institutions. Prospective male employees would surely wear a tie to an interview. Avatar Marty Dench, instead, strode in wearing his jeans and a T-shirt. Even more outrageously, half-way through the interview he changed into a suit. Mr Dench – real name Martijn Huisman – got the job. And Dutch bank ABN AMRO, his new employer, learned a bit more about the sort of people who use virtual worlds – three-dimensional computer simulations that look like computer games.
In an apparent paradox, the banks involved in virtual worlds such as Second Life, the largest one, see this as a way of connecting on a personal level with real and prospective customers as part of the social community or Web 2.0 phenomenon.
“You are going from having a conversation to having a relationship,” says Justin Bovington, CEO of Rivers Run Red, a London-based virtual world developer that works with California-based Second Life developer Linden Lab.
That is if you can get in. The Banker spent an estimated five hours of staff time, including that of two members of our technology team, trying to access Second Life. These are just teething problems, though, similar to the earlier days of the internet. Plus, the cost of the experimentation is minimal for the banks. It costs about $100,000 to develop a site, less than $2000 to buy an island, while in terms of salary costs most banks with a virtual world presence, only have a couple of staff working full-time on the project.
An added benefit of getting in there at an early stage is that you can make your mistakes while it is still a low-profile endeavour, notes Bas van Ulden, new business development manager at ABN AMRO. The Dutch bank opened the first virtual European branch office in Second Life in December last year, an exact copy of a real life building with a small door, walls and a roof.
The door was awkward for avatars to enter, however, because their real life counterparts use a keyboard and mouse to move them. But the normal laws of gravity do not apply, so the walls and roof were then made permeable to allow avatars to fly through them into the branch.
What excites the banks is the potential to create an emotional bond with existing and potential customers, a goal for any retailer and one that banks have historically been among the least successful at doing (see Bracken, page 10). There is increased micro-segmentation in banking but it cannot be done through the obvious routes such as age or postcode due to the changing nature of society, says Sukand Ramachandran, principal at Boston Consulting Group. Virtual worlds will help in this aim.
Island meeting point
ABN AMRO created a Young Professional Island where highly educated 25 to 35 year olds can meet each other. The bank is looking to offer them useful services, such as training for job interviews or help in understanding the options to finance the acquisition of a first house. The difference when compared with conventional seminars is that the avatars (bodily representations) can be walked through the process, leading to a much deeper understanding than just looking at a piece of paper or listening to a slide show.
Plus, the young professionals can easily do all this from home in the evening, notes Mr van Ulden. The bank holds investment seminars every two weeks for about 40 avatars (there are currently technical limitations on how many people can be on its island). The audience members can ask questions directly of whichever ABN AMRO investment guru gives the talk. They can also ask each other questions.
The experience is not like attending a video conference. When people write up their experiences of these seminars, they write in the first person as though they were there in reality, says Mr van Ulden. And when avatars talk to each other, they turn towards each other. Although not technically necessary, it appears that people feel it is like a real-life conversation.
The bank does not recommend products in these seminars, says Mr van Ulden. Instead it “shares its knowledge with customers”. The hard sell appears to be anathema to the social mores of virtual worlds. How many of those present then go on to the Dutch bank’s internet site to buy something cannot yet be measured.
It looks certain that this aspect will be developed to the point where an avatar could click on an icon and talk with a sales representative avatar about a product (assuming the product requires investment advice), and then buy it by having the avatar sign some forms. But that is in the future.
ABN AMRO also created an island called 0031, named after the international dialling code for the Netherlands, along with various other Dutch organisations. There are 320,000 Second Life members who have declared themselves to be from the Netherlands.
Attracting avatars
Collaborating with other organisations to create islands or events is another strategy used by banks to attract visitors and form relationships. Dutch bank ING uses its sponsorship of the Renault Formula 1 team to create interest in its brand – after former Formula 1 world champion Mikka Häkkinen’s avatar gave an interactive conference on the Renault F1 site in Second Life – and helped to create a site called ourvirtualholland in collaboration with the famous Reijks Museum, among others.
Ourvirtualholland was the sixth most visited site among real-life companies in a virtual world but, notes Wichert van Engelen, director for innovation at the bank’s retail arm, this needs to be put into perspective.
“It was morale boosting that this was more than Microsoft or Coca-Cola. But it was 700 persons a week – not that impressive in actual numbers,” he says. However, it is early days yet and there are many parallels to be drawn with the development of the internet, not least the technical problems of logging into virtual worlds and the security issues, such as stolen credit card numbers and the like, issues that are especially important to banks.
ING says it has learned that it is not good enough “to build yourself a nice headquarters and wait for people to come round. You really have to offer three things: activities, educational events and a nice environment,” says Mr van Engelen.
Thus ourvirtualholland has a couple of fundraising parties or festivals every month; shows exhibits from the Reijks museum that can only be seen there or in Amsterdam itself; and has a peaceful atmosphere for avatars to wander in, consisting of flat, grassy fields with windmills.
ING also decided to give out land for entrepreneurs to use. It gave the land out on a Friday night and by Saturday afternoon 15 of the 25 people who took up their offer had fully built creative sites. Avatar Ulrika, for instance, sells traditional clothes and wooden clogs to avatars for a small fee. This has to be paid for in Linden dollars, but can be exchanged into real currency via PayPal. There is an exchange rate, currently $268 Linden to $1. (There was also, in August, a bank run. Virtual bank Ginko Financial finally had to convert its deposits into perpetual bonds. It has no connection with a real bank but raises the question about how virtual banks should be regulated.
Mr van Engelen believes that the next steps are to make it easy for ING’s internet customers to be able to access the 3D hub and to develop financial services, ranging from simpler ones such as savings accounts to a stock exchange for small companies developing their businesses in Second Life or in other virtual worlds.
Stagecoach Island
American bank Wells Fargo, unlike the Dutch banks, has chosen to set up its own virtual world, Stagecoach Island, following an unproductive experience in 2005 with Linden Lab, the creator of Second Life. Experts allege this was because virtual worlds had not yet reached the tipping point of critical mass. In May 2006, Second Life had only 120,000 users. It now has eight million, although active ones number less than two million.
Wells Fargo’s main goal is to teach an 18- to 24-year-old audience about financial products. For its competitors, the main goals are to access key opinion formers and tie-in prospective and actual clients on an emotional level. For the US bank, which emphasises the idea of community as part of its values, making its site accessible to those with only a dial-up connection on their computers was a major reason to go it alone. A broadband connection is needed for other virtual worlds.
The Wells Fargo site is, in a way, a big game. “The most important thing is that it is literally set up so if you want to have a good time, you can,” says Erik Hauser, founder of Swivel, an experimental media company that advises the bank. Those who have joined use the (virtual) $50 they are handed very quickly on things such as snowboarding. To get more money, they need to answer financial questions and develop their financial knowledge. Thus, learning becomes a money-making, fun venture. In total, 228 virtual millionaires have been created on Stagecoach Island.
Social anthropology plays a role. The 18 to 24 year olds do not like billboards, says Mr Hauser. So the only places on Stagecoach Island with Wells Fargo’s name on are the ATM machines.
Wells Fargo realised that the concept of community was not the same for all age groups. “The younger audience does not walk around to a neighbour’s house and hand them a pie. The younger ones log on,” says Mr Hauser.
Business generation
Banks are aware of the need to capture the log-on generation. More of them are talking to the virtual world developers to see how they should approach this new channel.
Already blogs and online discussions can help in developing financial services products. The question is how banks will use the virtual world to aid this process. Retailers are already using it to test out ideas, such as clothing brand Escada, for example, which is testing out its less expensive clothing line.
Shoe manufacturer Reebok found it had attracted 7200 people to its shop who chose to visit every week. In the virtual world, people can visit at any time of day or night. The avatars can buy – and many of them do – fashionable trainers to wear as they traipse around Second Life.
If banks could harness or piggyback on this appeal, they would achieve quite an advantage. “If you can be where people’s passions are, they will allow you to be everywhere with them,” says Mr Bovington.
But the bottom line is profit and it is not yet clear how this will work. Money is being made on these sites. Producers of clothes, of plant pots for buildings and of services for the denizens of this world, need financial products such as credit cards and loans, as do the consumers. They need them both in the virtual world and the real world.
In the virtual world, according to Mr Bovington, there are already 37,000 people who earn between $100 to $5000 a month through their Second Life businesses. All these numbers are growing.
Linking the virtual and real needs of people is the current conundrum for the banks. “The real value would be in thinking how you can give [real] services to the client you can attract in the virtual world. That is the new frontier,” says Mr Ramachandran at Boston Consulting Group.
Today, a huge number of people have e-mail addresses. One day, they may all have avatars. How banks service them and how they leverage this knowledge to give a better service to the real people behind them is an interesting challenge.
“One day it will be huge – but I don’t know when,” says Mr van Engelen.
