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With virtual assets already being traded and sold in the metaverse, there is an inevitable demand that financial services, specifically banking, ensure secure payments, investments and transactions for all customers. We take physical and online banking security measures for granted, but how do these regulations and safeguards translate to a virtual world?
Luckily, banks have a long history of dealing with fraud in the real and online markets. Forward-thinking banks are already thinking about the metaverse as well, as they seek to capitalize on the untapped potential that an immersive, memorable and personalized customer experience offers. Pilot programs are already underway for connected experiences in areas such as 3D banking and personalized virtual banking. Innovative payment platforms and decentralized autonomous organizations (DAOs) will also make their way to the metaverse, creating a safe and engaging banking experience for the next generation of customers.
At first glance, banking and the metaverse may seem unlikely allies. After all, banking is a conservative, heavily regulated industry. Yet in some ways, banking is an obvious metaverse participant, as the backbone for safe and secure virtual transactions, enabling other industries to thrive. Delivering financial services through Web3 — the decentralized internet owned by communities of users and coordinated through mechanisms such as tokens and non-fungible tokens (NFTs) — is a natural way to meet the demands of young consumers primed for interactive experiences.
Consider that millennials, who led the way in disrupting personal finance through mobile banking, now have a greater awareness of the metaverse than their younger counterparts. They take their money seriously — 75% report they work with a professional financial advisor — and Gen Z isn’t far behind. Among those aged 18 to 24, 70% check their finances daily. They’re likely to follow “fin-fluencers” on platforms such as Discord, Reddit and Instagram. Also, 41% percent have sought financial advice on TikTok. (Yes, “FinTok” is real.)
But it’s the next generation of customers that banks should be preparing for. Generation Alpha is the newest member of the family unit, the children of millennials and the siblings of Gen Z. Gen Alpha’s oldest members were born in 2010 — the same year as the iPad — and they’re the first generation born entirely within the 21st century. For the under-12 set, it’s possible that all banking will take place in virtual worlds.
Tapping new markets and customers
The metaverse is an inevitability, and it’s essential for banks to prepare the foundation and capabilities to be ready when it ultimately explodes into reality. The good news for payment providers and retail and commercial banks is that there are very few obstacles preventing them from getting metaverse-ready. By building the infrastructure to support a holistic view of customers’ accounts (both flat and digital), banks can prepare their organizations for the connected, immersive experiences customers will be looking for. Integration between digital assets and mainstream finance is at the heart of banks’ ability to tap new markets and customers — and it’s gaining a foothold among young consumers and institutions alike.
One in five Americans has invested in, traded or used digital assets. More consumers aged 13 to 39 have invested in cryptocurrencies and NFTs than in stocks. And Wells Fargo pointed out in a recent note that while crypto’s role in the financial ecosystem is still up for debate, wide-scale adoption of crypto and blockchain products is underway at some of the largest global institutions. Within banks’ IT and process infrastructures, integration is a safe way to begin tapping new markets and opening the door to the connected experience consumers are looking for. With integration, banks and their customers take another step away from physical branches and 2D online banking and closer to personalized virtual banking that connects one-on-one.
Much remains unknown about how virtual worlds will evolve. Yet even amid global inflation and monetary tightening in the US, integration between digital currency and mainstream finance continues to grow. Consumer banks must act now to leverage the metaverse to give young and future customers the personalized and immersive experience they want.
Chander Damodaran is CTO at Brillio.