Should Financial Institutions Consider Metaverse Solutions?

The use of emerging technologies such as the metaverse, augmented reality and virtual reality has generated significant interest and experimentation across various industries, including retail banking. These innovative technologies offer opportunities for banks and credit unions to foster customer engagement and drive innovation.

The metaverse is going to have a massive impact across all industries, according to McKinsey. In 2022, well over $120 billion in private equity and venture capital funding went into metaverse-related businesses, according to the firm’s report, “Value Creation in the Metaverse.” The report also claims that the metaverse will generate $5 trillion in value by 2030. In other words, the metaverse is becoming increasingly harder to ignore.

Given how banking organizations are experimenting with augmented reality, virtual reality and the metaverse, it is clear that this technology is still being defined. Yet the potential impact such technology could have on customer experiences, product innovation, sales, marketing and revenue models, and every component of digital transformation, is also starting to become clear for the progressive companies that have been early adopters.

McKinsey defines the metaverse as a virtual universe composed of interconnected virtual worlds, social networks and virtual economies. It is a fully immersive and interactive experience that allows users to interact with each other and with virtual objects in real time. It is an extension of the internet that allows users to experience a new form of digital reality that is distinct from (and integrated with) the physical world.

The metaverse is not a single platform or technology nor is it limited to virtual reality (VR) or augmented reality (AR). Instead, it includes a range of technologies such as blockchain, artificial intelligence and 5G networks.

Web3 also contributes to the metaverse by espousing decentralization and interoperability, but it’s not the metaverse, which is anchored on immersive experiences that can be both centralized or decentralized.

Consumer and Banking Perspectives of the Metaverse

Consumers and businesses are showing increasing interest in and enthusiasm for the metaverse.

Consumers view it as a new form of digital entertainment, social interaction and content consumption. McKinsey points out that consumers are already spending significant amounts of time and money on immersive technologies such as virtual and augmented reality, and that the metaverse represents the next step in this trend. In addition, according to a survey conducted by the VR/AR Association, 75% of respondents believe that immersive technologies can improve customer engagement and satisfaction.

“Consumers are embracing the metaverse because it represents a new frontier in digital engagement and entertainment. As we continue to spend more time online and seek new ways to connect with each other, the metaverse offers a unique and immersive experience that allows us to connect with others and explore new worlds in ways that were not possible before.”

— Satya Nadella, CEO, Microsoft

With financial institutions looking for new ways to connect with customers, the metaverse provides unique potential for ultra-personalized experiences and real-time contextual engagement. Some banks and credit unions are exploring those possibilities as part of their digital transformation process, with investments being made in VR and AR initiatives.

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Why are Financial Institutions Testing Metaverse Solutions?

Most metaverse initiatives at banks and credit unions are focused on ways to improve the customer experience, enhance digital offerings, improve sales or streamline back-office operations. The thinking is, with a more immersive and personalized experience, customers would be more likely to engage with banking products and services. These could include virtual reality banking experiences or augmented reality account opening and credit applications.

For instance, some financial institutions have created virtual branches. In some instances, these virtual branches have been designed to resemble physical branches, complete with teller windows, waiting areas and even conference rooms. Customers can log into the virtual branch and interact with a virtual teller to perform various banking transactions, such as opening an account or applying for a loan. The potential long-term benefits include reduced real estate costs and a more convenient and engaging experience customers.

“The metaverse is an exciting new frontier for the banking industry, providing a platform for digital identity management, virtual investments and financial education. By leveraging the power of the metaverse, banks can transform the way customers interact with financial services and create new revenue streams in the process.”

— Jay Reinemann, Managing Partner, Propel Venture Partners

Another metaverse play has been with virtual events. For example, banks and credit unions have hosted virtual financial education seminars and investment conferences. Because people from all over the world can attend, these events are an inclusive and accessible option. Additionally, they can help financial institutions reduce their travel expenses and their carbon footprint.

The metaverse, AR and VR also offer operational efficiencies for retail banking organizations. For example, virtual reality training programs can be used to help employees learn new skills and procedures. Digital identity management is another use case.

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What Financial Institutions are Testing Metaverse Solutions?

Some major banks have tried out the metaverse in an effort to experiment with improving customer engagement and providing financial services in an innovative way. Examples include:

  • CaixaBank: One of CaixaBank’s forays into the metaverse is this virtual reality bank branch from its Portuguese subsidiary BPI. Another is imaginLAND space, created by imagin as a 3D replica of its physical imaginCafé.
  • BBVA: BBVA Valora is a service designed to help people make more informed decisions about buying or renting a property with the focus on saving time, money and stress. BBVA Valora mixes Big Data, Xamarin and augmented reality to transform the way people find their new home.
  • JPMorgan Chase: Chase opened its Onyx lounge in the metaverse, specifically in the blockchain-based world of Decentraland, in 2022. Though the lounge doesn’t offer traditional banking services, visitors can learn more about Chase’s Onyx unit, which is responsible for an assortment of digital payments initiatives, including Liink, the banking giant’s blockchain-based payments solution.
  • Bank of America: BofA is the first financial services firm to launch virtual reality training in nearly 4,300 financial centers nationwide. This technology, which simulates customer interactions, is intended to give approximately 50,000 branch employees practice performing a range of tasks, from routine to complex.

While there are fewer examples of community banks and credit unions involved in such initiatives compared to larger banks, several have started exploring the metaverse, AR, and VR technologies to improve customer engagement and provide innovative financial services.

  • Allied Bank: Allied Bank in Pakistan created an eye-catching virtual branch, accessible through virtual reality headsets, a mobile app or an internet browser. Visitors can learn about products and services, open an account, conduct transactions or contact a customer representative.
  • Coastal Community Bank: Coastal World is an immersive 3D web platform where visitors can play some virtual games, such as competing in bicycle, car and boat races, and learn about assorted digital banking solutions. Coastal Community intends to expand into providing financial education and eventually into performing banking transactions.

“The key bank opportunity will be creating a flexible financial services ecosystem or platform that allows consumers to seamlessly move from the physical to the virtual world, providing easy, frictionless and personalized experiences.”

— Dave Donovan, head of financial services, North America for Publicis Sapient

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Challenges With Metaverse Solutions

While there are many advantages to testing metaverse innovations, financial institutions must also be mindful of the challenges.

  • Privacy and Security: The metaverse, AR, and VR require the collection and processing of large amounts of personal data, which can create privacy and security risks. If metaverse outposts are collecting customer data, it must be done so securely. Such activities also must comply with data protection regulations such as GDPR and CCPA.
  • Customer Accessibility: New metaverse solutions often require access to specialized hardware and software, which can create accessibility barriers for some customers. Banks and credit unions must ensure that they are providing alternative channels for customers who are unable to access these technologies.
  • Integration with existing systems: Integrating advanced technologies with existing banking systems can be challenging for many financial institutions, as these systems may not be designed to handle the complex data and processing requirements of these new technologies. It is important to invest in the necessary infrastructure to support these technologies and to select the right technology partners to ensure seamless integration.
  • Cost: Implementing advanced technologies can be expensive, requiring significant investment in hardware, software, and infrastructure. Even with the ability to partner with third-party solution providers, banks and credit unions must ensure that they are investing in new technologies strategically and in alignment with future business models and existing priorities.

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The Future of Banking and the Metaverse

Given the growth potential of the metaverse, retail banking should consider pursuing opportunities in the metaverse, as it offers significant potential for innovation, customer engagement, product and service innovation, and revenue growth. It is also believed that early adopters of metaverse technologies are likely to gain a competitive advantage in the industry.

The Accenture Technology Vision survey for 2022 found that 67% of global banking executives agreed that the metaverse will have a positive impact on their organizations, while 38% said it will be a breakthrough or transformational. Around 92% agreed future digital platforms need to offer unified experiences that enable interoperability of customers’ data across different platforms and spaces.

That said, the metaverse is still in its early stages and that there are significant challenges and risks associated with pursuing opportunities in this emerging technology. Regulators continue to play a game of “catch up” regarding the metaverse and consumers remain tentative regarding the use of personal data.

As a starting point, banks and credit unions may want to investigate which metaverse use cases they can leverage without high levels of cost or risk. Accenture recommends testing the use of VR for training or by enabling 3D branch-like experiences before looking at ways to use immersive technologies to transform how to interact with customers and employees.

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