Financial institutions

The Virtual Gold Rush: Financial Institutions Join the Metaverse

The metaverse is almost here. And the fact that this is not a passing fad is demonstrated by the fact that financial institutions are joining the metaverse.

Reputedly conservative in adopting new trends and extremely cautious in the assets they create or accept, banks and investment funds are now taking their first steps into the virtual world. This is perhaps the highest form of validation the new digital world can achieve.

Forecasts for the development of the metaverse

During the first quarter of 2022, the research company Gartner, Inc. published an interesting report, which predicts that by 2026, 25% of people worldwide will spend at least one hour a day in the metaverse.

What are people likely to do in this virtual space? According to the report, they will use the metaverse for work, entertainment, education, social interactions and shopping.

See also: Applications of augmented and virtual reality in the financial industry

Thus, according to Gartner experts, the metaverse will become a kind of digital replica of our real world. And that’s why financial institutions are joining the metaverse.

In terms of numbers, PwC estimates that, by 2030, the global metaverse market could “boost the global economy” by $1.5 trillion. Goldman Sachs is even more optimistic: according to its estimates, this value will be $12.5 trillion, with around 35% of the digital economy moving to the metaverse.

Early Adopters: Prestigious Financial Institutions Join the Metaverse

The question is, who is in the metaverse now, and who is just exploring the option?

The first bank in the United States to enter the metaverse and open a virtual lounge was JP Morgan. They joined Decentraland earlier this year and opened the Onyx Lounge.

For now, users can browse the show and watch experts discuss cryptocurrencies and digital finance. No real financial transactions are taking place yet, but this is an important first step.

Outside of the United States, Kookmin Bank of South Korea adopted the metaverse even before JP Morgan, in November 2021, by developing KB Metaverse VR Branch Testbed.

HSBC is another financial institution that has followed suit by joining the metaverse. In March, HBSC partnered with The Sandbox, becoming “the first global financial services provider to enter The Sandbox.”

“Through our partnership with The Sandbox, we are making our foray into the metaverse, enabling us to create innovative brand experiences for new and existing customers,” said Suresh Balaji, HSBC CMO, Asia-Pacific, in the press release announcing the partnership.

The bank will acquire a piece of The Sandbox metaverse, called LAND, and use it to engage with sports, esports, and gaming fans through educational and accessible experiences.

Why should financial institutions join the metaverse now?

Some people say the metaverse is already here, others think it’s still in development.

Anyway, various companies – such as Meta, Decentraland, Sandbox, Victoria VR, Croquet, OVER, Immers Space, among many others – are actively creating it, each in their own way.

See also: Is the key to the metaverse more links between virtual spaces?

So why would financial institutions join the metaverse right now?

There are several reasons for this:

1. Early adopters lead the way

Competition in the world of financial services has reached unprecedented levels. There is the threat posed by fintech, as well as cryptocurrencies.

Being the first to arrive in virgin territory is a major asset in this race.

2. Brand Opportunities

Financial institutions are joining the metaverse to prepare for the next generations of customers. They want to change their rigid corporate image and put on a friendly digital face instead.

3. The new face of customer service

Speaking of digital face, it will soon replace the bank teller in the office.

Brick-and-mortar offices and bank branches are disappearing day by day, replaced by online services. They represent a more efficient and cost-effective way to serve customers and manage their finances.

4. Financial institutions are starting to embrace crypto

If you can’t beat them, join them – is a saying that finds its application in the new attitude of financial institutions towards cryptocurrencies.

A few years ago, banks questioned the legitimacy of crypto at every opportunity. Now, several bans already agree to transact with cryptocurrencies.

Being virtual money that you can spend in the virtual world, crypto goes hand in hand with the metaverse, where financial institutions should also have a presence.

Will we soon be banking only in the metaverse?

While the virtual world is increasingly attractive, especially for the younger generation, the real world is going nowhere.

As financial institutions join the metaverse, they are not likely to abandon the physical world. Regulatory and governance rules will be adapted to frame virtual worlds, but will also require a presence in the real world.