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With virtual assets already being traded and sold in the metaverse, there is an inevitable demand for financial services, especially banking services, to 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 into a virtual world?
Fortunately, banks have a long history of fighting fraud in real and online markets. Forward-thinking banks are also already thinking about the metaverse, 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, the bank and the metaverse might seem unlikely allies. After all, banking is a conservative and heavily regulated industry. Yet in some ways, banking is a clear participant in the metaverse, as the backbone of safe and secure virtual transactions, enabling other industries to thrive. Providing financial services via 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 hungry for interactive experiences.
Consider that millennials, who led the way in disrupting personal finances through mobile banking, now have greater awareness of the metaverse than their younger counterparts. They take their money seriously — 75% say they work with a professional financial advisor — and Gen Z isn’t far behind. Among 18-24 year olds, 70% check their finances daily. They are likely to follow end-fluencers on platforms such as Discord, Reddit and Instagram. Additionally, 41% percent asked for financial advice on TikTok. (Yes, “FinTok” is real.)
But it’s the next generation of customers that banks should prepare for. Generation Alpha is the newest member of the family unit, the children of Generation Y and the siblings of Generation Z. The oldest members of Generation Alpha were born in 2010 – the same year as Generation Alpha. ‘iPad – and they are the first generation born entirely in the 21st century. For children under 12, all banking may take place in virtual worlds.
Tap into new markets and customers
The metaverse is inevitable, and it’s critical that banks prepare the foundations and capabilities to be ready when they eventually explode into reality. The good news for payment providers and retail and commercial banks is that very few hurdles prevent them from preparing for the metaverse. By building the infrastructure to support a holistic view of customer accounts (both flat and digital), banks can prepare their organizations for the connected and immersive experiences customers are looking for. The integration between digital assets and traditional finance is central to banks’ ability to tap into new markets and customers – and it’s gaining a foothold among young consumers and institutions.
One in five Americans have invested, traded or used digital assets. More consumers aged 13-39 invested in cryptocurrencies and NFTs than in stocks. And Wells Fargo pointed out in a recent note that while the role of crypto in the financial ecosystem is still up for debate, large-scale adoption of crypto and blockchain products is underway in some of the world’s largest institutions. Within banks’ IT and process infrastructures, integration is a sure way to start tapping into new markets and opening the door to the connected experience that consumers are looking for. Through integration, banks and their customers are moving even further away from physical branches and 2D online banking and closer to personalized virtual banking services that connect face-to-face.
Much remains unknown about the evolution of virtual worlds. Yet even amid global inflation and US monetary tightening, the integration between digital currency and traditional 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.
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