Banks can no longer ignore metaverse

NEW DELHI: Banks have now a more compelling proposition to be able to draw in younger clients and perhaps develop new goods and business models with the support of their metaverse presence. In a study by the Oliver Wyman Forum, a think-tank, revealed patterns in metaverse user behaviour and discovered that users of the metaverse tend to be male, urban, and younger and are open to explore banking options in the metaverse.

Banks can now leverage the metaverse to establish brand recognition and trust. Banks are some of the most trusted institutions. There is, therefore, huge potential for them to tap into their customers’ growing interest in crypto and in storing value in digital assets. And it’s not just younger generations using crypto; in fact, 45% of crypto holders in the baby boomer generation used it to make a purchase in 2022, compared to just 30% of Generation Z.

Mastercard, by processing crypto payments, is showing how a traditional financial institution is adapting to crypto demand. There is a need now for funds that trade in bitcoin to have a bank’s name backing them. Banks are preparing for the future when digital assets would be completely integrated into conventional financial activities like mortgages, loans, etc. by entering the crypto area by processing payments and providing custody services. With more individuals relying on peer-to-peer bitcoin transactions and wanting to trust payment sources, risk management and user verification may present another area where banks may utilise their brands to their advantage.

The demand for digital platforms to handle these financial transactions, both in the metaverse and the real world, grows along with the metaverse and the variety of goods and services it offers. For instance, Meta, formerly known as Facebook, recently began a pilot programme enabling users to send money from a digital wallet to others through WhatsApp, providing advantages like free international transfers. By releasing their APIs, the banking sector has the ability to offer these platforms or enable consumers to link their bank accounts to already-existing payment apps. These new applications, though, won’t be limited to the screens of smartphones and laptops; they’ll need to be integrated into the various VR and AR platforms that will make up the metaverse. Banks are often the driving force behind payment apps that don’t have their own banking licences in the traditional fintech world, and they can profit from using a similar white-label strategy in the metaverse. For banks to ignore the metaverse, too much value is being transported there.

Banks and financial institutions are realising that millions of people are spending time on metaverse platforms, whether in games, virtual concerts or real-estate sales channels. These are all extremely visual and immersive and create new advertising opportunities, from digital billboards to partnerships with celebrities, whose avatars will speak to potential customers.

For financial institutions, the key to success in this new world is not in waiting for regulation but in determining how they can leverage their unique attributes— brand recognition and trust—now. Using these attributes to meet customers’ needs, including their desire to participate in the crypto and metaverse economies, will help banks successfully navigate the transition, no matter what this new world looks like.

Mastercard, by processing crypto payments, is showing how a traditional financial institution is adapting to crypto demand