As we in the UK move from summer to autumn, it seems the hype surrounding the “metaverse” has calmed down.
Like most, having researched what people meant by the term, I quickly realised there was no single, common definition.
Some definitions included technologies like augmented reality (AR) where virtual objects seemingly appear in the real world, the most popular example being Pokemon-Go.
Other definitions were quite specific that a metaverse was just a virtual space where users could interact with other users, typically through avatars.
So what have banks been doing about this new buzzword?
Recently, Korean banks like Hana, Woori and Kookmin have launched branches in a metaverse setting. Kookmin Bank allows its customers to move around their own virtual financial town that has a virtual branch and financial playground for customers and a “tele-commuting” centre for staff.
Customers can wander into the virtual branch, interact with content and then speak to a real-life agent through a video call.
Woori Bank has opted to join a broader community initiative, the ‘Metaverse Alliance’, which has about 200 companies collaborating to create a metaverse broader than just banking.
However, we have kind of been here before with Second Life, created by Linden Lab in 2003. I believe ABN Amro was the first traditional bank to create a virtual branch there.
There was also the infamous Ginko Bank that offered 69.7% a year interest paid in the platform’s virtual currency, Linden Dollars. This alleged Ponzi scheme triggered the closure of all banks on Second Life.
It’s easy to see the fit for the metaverse and gaming. It’s well known the gaming industry is bigger than Hollywood, generating over $174 billion in 2020 and forecast to grow to $314 billion by 2026 (according to Mordor Intelligence).
There over 2.69 billion gamers globally, and with almost 1.5 billion in the Asia Pacific region alone, it’s no wonder Asian banks are seeing an opportunity with an audience that is already comfortable with digital currency.
So, what’s the opportunity for banks? For me the most immediate opportunity is not necessarily financial, but a learning opportunity. It is a chance for banks to get ahead of the curve to understand changes in:
- Customer behaviour/interaction: A virtual world is not limited by space. Already investment banks have tested new interfaces that allow traders to go beyond the physical six-screen desks they currently have to boast almost limitless screen estate. In my previous role, we created a virtual wealth management solution that allowed us to explore how we could create more engaging wealth management dashboards that wouldn’t be limited to a single laptop screen. Kookmin Bank’s virtual town is another good example of this.
- Digital currency: Whether it is through CBDCs or other cryptocurrencies, it is clear that the future of money is moving to digital currency. Crypto projects like Axie already provide a platform for gaming currencies, as does Audius for music. Both enable new business models for the creator economy and hence provide an opportunity for banks to not only understand their role, but to find new opportunities in digital currency.
- Collaboration: It’s difficult to see a bank creating its own metaverse without any collaboration with a broader set of partners, such as Woori Bank joining the Metaverse Alliance. Another example I’m exploring is with AR. Let’s say a homeowner can walk around their home and interact with appliances to read/search for a virtual manual for the appliance, buy accessories from the manufacturer, buy an extended warranty or look at maintenance videos. The key point here is that a number of different providers collaborating on one platform is far more effective than a single app provided by a bank for financing options.
Like many new technologies, it is often not one thing, but many that drives adoption for a specific new solution. For smartphones it was the confluence of cheaper/better processing power, memory, screen quality, touch interface, mobile bandwidth and app stores. Similarly, adoption of metaverses will be driven by a number of factors such as digital currency, better experiences/graphics and 5G.
I’m just saying that just because the revenue opportunities may not be clear, just because there is more hype than practicality and just because it kind of failed before, it’s no reason to stop trying, exploring and thinking different.
About the author
Dharmesh Mistry has been in banking for 30 years and has been at the forefront of banking technology and innovation. From the very first internet and mobile banking apps to artificial intelligence (AI) and virtual reality (VR).
He has been on both sides of the fence and he’s not afraid to share his opinions.
He is CEO of AskHomey, which focuses on the experience for households, and an investor and mentor in proptech and fintech.
Read all his “I’m just saying” musings here.