Marketing assets

Impact of the metaverse on financial services

Financial services firms have joined their peers across industries in exploring potential opportunities in the metaverse, though few are yet attempting to do so at scale, per Mckinsey and Company.

The report states that the future extent of the metaverse’s impact on the industry depends on the development of the underlying technology, particularly using Web3, and the degree of adoption of the platforms as part of our daily interactions.

How companies are currently using the metaverse

Financial institutions have embraced the more traditional Web 2.0 metaverse and experimented with Web3 metaverse venues. In the context of Web 2.0, we see financial services companies using technology for employee training (eg Bank of America VR training); creating virtual “financial cities”, telecommuting centers and interaction spaces (like South Korea’s KB Kookmin Bank); and offering virtual investment advisory services (e.g. NH Investment & Securities). Although these applications are quite mature, their impact on the fundamental business model of financial services has been only modest.

In the Web3-enabled metaverse, we’re starting to see more creative engagement patterns. For example, HSBC purchased a virtual pitch in The Sandbox dedicated to engaging with esports enthusiasts. As a London-based fintech, Sokin is building infrastructure for processing Metaverse payments, transactions, and investments, and neobank Zelf is launching integrated banking services for Metaverse gamers through its MetaPass in Discord. Several companies, including a North American technology company TerraZero, provide back-end support for virtual real estate financing in the metaverse. There is no shortage of financial services companies exploring the usefulness of the latest metaverse evolution.

As its function shifts from primarily mainstream entertainment to more commercial applications – and from niche social interactions to becoming a social network – the opportunities for the sector will only expand, including following examples:

Value creation in the metaverse: the real business of the virtual world

— Marketing: Establishments can create digital antennas in the metaverse to build their brand and their credibility with users, demonstrate their ability to innovate, or even offer customer interactions in a hybrid way with more traditional digital or even physical channels.

— Infrastructure: financial institutions, especially the more traditional ones, are uniquely positioned to bridge the trust gap that has traditionally held back wider adoption of services such as digital IDs, digital payments or NFT custody, cryptocurrencies or other digital assets.

— Emerging products and services: As cyber insurance for businesses and similar services become more mainstream, insurers and cybersecurity companies are well positioned to capture parts of this emerging value pool, perhaps even through collaborations and innovative models.

What could happen next

As the metaverse potentially captures a greater share of everyday human interactions, digital versions of more sophisticated banking services could emerge to serve these users. Examples could include:

– integrated banking-like services for wallet owners in native metaverse locales, such as multi-currency cash management.

— back-end service for financial services, such as creating and warehousing virtual real estate mortgages.

— investment funds and services for metaverse projects, such as metaverse-specific investment funds.

– customer engagement enhancements, such as fun credit education and unique loyalty experiences.

– the financialization of everything, as more and more digital assets are created with utility in a metaverse context, for example by being used as collateral for loans.

The growth of these use cases will depend on the extent to which the metaverse is adopted. And the value and convenience of financial services in the metaverse must exceed the utility of online or physical services today. If engagement in the metaverse grows, more and more financial services companies will have to choose between investing and entering at scale, establishing a minimum position, or doing nothing for the time being.

It’s a decision that depends on four factors: the willingness to bet on the future value of the metaverse; the talent, ability and ability to develop a relevant position; the scale of potential metaverse customers and their relevance to existing and future customers; and the extent to which the vision of the metaverse matches the strategy and culture of a company and its employees.

Not entering the metaverse is also a strategic choice. But while widespread adoption of the metaverse and the development of large revenue pools in financial services may take time, many companies may decide that early investment is an attractive strategic hedge, especially with the growing integration with native digital assets.

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