How UX in the Metaverse Will Transform Banking

Banking involvement in the metaverse will enable exponential growth of the 'creative economy.' In order to prepare for the impending metaverse acceleration, financial institutions must acquire new people and embrace new technology and prepare for further democratization of finance.
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Digitization and the widespread use of cashless finance already offer a low-cost option to efficiently expand any financial business, but the metaverse will go much farther.

The development of the metaverse will lead to the formation of a new virtual environment in which individuals will be able to engage in creative interaction, entertainment and work. And, while financial transactions will be in demand there as well as in the real world, customers will want them to be free of territorial and other physical limitations.

Mega Expectations for Metaverse:

82% of CEOs believe the metaverse will be integrated into their business within three years.

The metaverse, according to Citibank experts, will become the next generation of the internet, or Web 3.0. Users will have access to a wide range of services, such as commerce, art, media, advertising, healthcare and social cooperation. It will be available on desktops, gaming consoles, cellphones and virtual reality (VR) and augmented reality (AR) devices.

Leveraging this broad market, the total addressable potential for the metaverse is projected to be between $8 trillion and $13 trillion by 2030, with an estimated five billion metaverse users.

Metaverse Experience Gains Traction

Millions of individuals are already working to build the metaverse. Despite the fact that only 30 million VR headsets are in use, the most popular metaverse precursors — online games like Fortnite, Roblox and Minecraft — already have half a billion total players.

In terms of transaction volumes, the Sandbox is the largest virtual environment, with 65,000 transactions in virtual land worth $350 million in 2021. Decentraland became the second largest, user-owned, Ethereum-based virtual world, with 21,000 real estate transactions totaling $110 million, according to Forbes.

Fashion Street Estate, which sold for $2.42 million, was the most expensive real estate parcel in Decentraland. Decentraland revealed intentions to deploy the world’s first fiat-to-crypto ATM in the metaverse in 2022.

Global corporations such as PwC, JP Morgan, HSBC and Samsung have already purchased virtual land tracts that they hope to develop. Dubai announced its Metaverse Strategy with the goal of becoming one of the world’s top ten metaverse economies as well as a worldwide center for the metaverse community and creative economy.

Read More: The Banker’s Guide to the Metaverse

The Creative Economy Will be Fueled by the Metaverse

Creativity will fuel the global economy of the digital era through the metaverse and the new digital reality. Human nature is built on creativity — it is hard to imagine the evolution of society and mankind without creativity. With the development of digital technology and, specifically, the metaverse, the creative economy will gain increased influence and respect.

In 2001, John Howkins published a book, “The Creative Economy,” describing economic systems in which value is based on inventive creative attributes rather than traditional resources like land, labor and money. The term “creative economy” refers to creativity across the economic system, as opposed to creative industries, which are restricted to certain sectors, such as advertising or movie production.

What the Future Holds:

Digitization has created a new paradigm in which emotions and experience drive economic interactions. As a result, a creative economy is gaining increased influence, propelled by the metaverse.

People in the creative economy do more than merely purchase and sell products, services or features. They embrace the feelings and experiences that products convey. People will spend significant sums in the metaverse for intangible goods that have unique value and offer meaningful experiences.

According to Deloitte, the creative economy is anticipated to be a significant determinant of long-term economic growth; therefore, the importance of financial services in its development is obvious. Today, we see fintechs already actively participating in metaverse technologies and other digital developments that assist the growth of a creative economy. The question is how open and competent existing financial institutions can be to meet the rising demand.

Read More: Metaverse in Banking: Not Just a Playground for Big Banks Anymore

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Metaverse Creators Don’t Want to be Outlaws

Artists, designers and digital developers who benefit from every sale and resale of the digital products they generate will become the new multimillionaires in a creative economy. In the world of NFTs (non-fungible tokens, i.e. unique digital assets) crypto artists and crypto investors accumulate enormous wealth in months, a trend that is shocking for the traditional economic system.

You probably heard about the NFT painting by artist Beeple: “Everydays: the First 5000 Days,” which sold for $69 million at Christie’s in 2021, setting a record for digital art sales. Total NFT digital art sales exceeded $25 billion in 2021, Reuters reports. The market volume is impressive, but a significant amount of this money stays in the shadows. And not because creators don’t want to pay taxes.

European crypto-artist Ilya Borisov, who in 2021 sold 3,557 NFT paintings for 8.7 million euros, had his bank account seized by the police, and could get 12 years in prison. Why? Because of his enormous income, which government officials could not explain other than “money laundering on a large scale” even after he paid taxes on it.

Key Role for Banking:

The speed at which the creative economy develops will be determined by how accessible and customer-centered financial services will be in the metaverse.

Support from traditional financial institutions is critical for metaverse development. Fiat money and incumbent financial services should be used to connect digital assets and cryptocurrencies to the real world.

Without this integration, the early metaverse pioneers are nothing but outlaws. Unfortunately, we currently observe a shortage of skill, knowledge and laws in dealing with crypto wealth among regulators and tax and financial services providers. However, the growth of digitally monetized goods will result in a creative economic development in which anyone may contribute to produce value.

Business Believes in the Metaverse

According to Gartner, 25% of consumers will spend at least one hour every day in the metaverse for work, retail, education, social networking and/or leisure by 2026. McKinsey estimates the value of the metaverse could reach $5 trillion by 2030.

Those kind of numbers have caught the attention of business executives, bankers included. Accenture’s “Technology Vision 2022: Meet Me in the Metaverse,” reveals that nearly all executives polled worldwide (98%) feel that technical advancements are becoming more credible than economic, political or social trends in projecting their organization’s long-term strategy.

All Eyes on the Metaverse:

71% of CEOs believe the metaverse will have a positive influence on their firms, according to Accenture, with 42% saying it could be a game changer.

According to PwC’s “2022 US Metaverse Survey” of over 1,000 U.S. business executives, 82% of CEOs believe the metaverse will be integrated into their corporate operations within three years. Almost half of these respondents say that acquiring people with metaverse-related abilities should be a high priority for profiting in the forthcoming metaverse. 41% prioritize funding of relevant technology.

Read More: Four Technology Trends Radically Altering the Banking Model

The Metaverse Will Democratize Finance

The metaverse will cause a shift from a one-dimensional market to a volumetric virtual world with many dimensions and diverse rules of interaction mediated by a creative economy. Instead of the two fundamental coordinates of product/feature range and branch network size, the banking sector will have to adopt unique coordinates of many connected virtual worlds via various channels and solutions.

The banking industry should be capable of providing digital financial access for millions of people who will generate new virtual goods for sale or exchange. Fintechs have already considerably enhanced the consumer financial experience by increasing the number of channels and making financial services, capital and assets more accessible to all. It has fundamentally disrupted banks’ and traditional financial institutions’ monopolies on access to financial instruments, thereby democratizing it.

Following the democratization of access to financial instruments, the democratization of financial instruments themselves is a logical next step. The first attempts in this approach are currently being made: decentralized cryptocurrency as a digital alternative to money, NFT as a digital alternative to investment assets and ICOs (initial coin offerings) as a digital alternative to IPOs.

Listen In: Blockchain, NFTs, Web 3.0 and Technologies Enabling the Metaverse

Massive Change As DeFi + Metaverse Roll Out

These digital alternatives have already generated a multibillion-dollar industry. Despite the market downturn, there are over 18,000 cryptocurrencies with a combined valuation of almost $1 trillion. Such demand is reasonable since the market needs a better solution that fits the growing digitalization of the economic system.

As the internet has democratized access to information, entertainment, learning, business and communication, such global democratization of value and liquidity will enable billions of unbanked individuals to participate in the generation and distribution of value.

Decentralized finance (DeFi), which used blockchain technology an cryptocurrencies to remove financial middlemen, will profoundly transform people’s financial experiences by shifting their perception of value. It is development closely related to the metaverse.

Almost everything may be converted into an asset and be used in a financial exchange with adequate liquidity without the involvement of middlemen. Decentralized liquidity markets for all sorts of assets will most likely emerge spontaneously every second, just as quickly as content is shared on social networks.

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