Banks can’t afford to roll their eyes at the metaverse

With virtual assets already being traded and sold in the metaverse, there is an unavoidable demand that financial services, especially banking, guarantee secure payments, investments and transactions for all customers. We take security measures for physical and online banking for granted, but how do these rules and safeguards translate into a virtual world?

Fortunately, banks have a long history of dealing with fraud in the real and online markets. Forward-thinking banks are also thinking about the metaverse, as they seek to capitalize on the untapped potential that provides an immersive, memorable, and personalized customer experience. Pilot programs for connected experiences are already underway in areas such as 3D banking and personalized virtual banking. Innovative payment platforms and decentralized autonomous organizations (DAOs) will also find their way into the metaverse, creating a secure and engaging banking experience for the next generation of customers.

At first glance, banking and the metaverse may seem unlikely allies. After all, banking is a conservative, highly regulated industry. But in some ways, banking is an obvious metaverse participant, as the backbone for safe and secure virtual transactions, allowing other industries to thrive. Delivering financial services through Web3 – the decentralized Internet owned by user communities and coordinated by mechanisms such as tokens and non-replaceable tokens (NFTs) – is a natural way to meet the demands of young consumers ready for interactive experiences.

Recall that millennials, who took the lead in disrupting personal finances through mobile banking, now have a greater awareness of the metavers than their younger counterparts. They take their money seriously – 75% report they work with a professional financial advisor – and Gen Z isn’t far behind. Among 18 to 24 year olds 70% check their finances daily. They are likely to follow “fin-fluencers” on platforms such as Discord, Reddit, and Instagram. Also, 41% percent have sought financial advice on TikTok. (Yes, “FinTok” is real.)

But it is the next generation of customers that banks need to prepare for. Generation Alpha is the newest member of the family unit, the children of millennials and the siblings of Gen Z. The oldest members of Gen Alpha were born in 2010 – the same year as the iPad – and they are the first generation to fully within the 21st century is born. For the group under 12, it is possible that all banking will take place in virtual worlds.

Tap into new markets and customers

The metaverse is an inevitability, and it’s essential for banks to prepare the base and capabilities to be ready when it finally explodes into reality. The good news for payment providers and retail and commercial banks is that there are very few hurdles to stop them from becoming metaverse-ready. By building the infrastructure to support a holistic view of customer accounts (both flat and digital), banks can prepare their organizations for the connected, immersive experiences customers are looking for. Integration between digital assets and mainstream finance is at the heart of banks’ ability to tap into new markets and customers – and it is gaining a foothold among young consumers and institutions alike.

One in five Americans has invested in, traded, or uses digital assets. More consumers aged 13 to 39 have invested in cryptocurrencies and NFTs than in stocks. And Wells Fargo pointed out in a recent note that while crypto’s role in the financial ecosystem is still up for debate, widespread adoption of crypto and blockchain products is underway at some of the largest global institutions. Within banks’ IT and process infrastructures, integration is a secure way to tap into new markets and open the door to the connected experience consumers are looking for. With integration, banks and their customers are taking a step further away from brick-and-mortar branches and 2D online banking and closer to personalized virtual banking that connects one-to-one.

Much is still unknown about how virtual worlds will evolve. But even despite global inflation and monetary tightening in the US, the integration between digital currencies and mainstream finance continues to grow. Consumer banks must act now to leverage the metaverse to provide young and prospective customers with the personalized and immersive experience they want.

Chander Damodaran is CTO at Brillio.