Immersive finance will be pivotal in the development of this new virtual world, catalyzing payments and other transactions that will be fundamental in the digital economy
Firstly, it’s important to understand that the metaverse is an immersive digital world, where people can carry out all kinds of activities, from meeting new friends to collaborating on a project and even making financial transactions.
Combining augmented reality, virtual reality and 3D holographic avatars, spaces are created vividly and accessed using devices such as virtual reality goggles, computers, and tablets.
Although the metaverse is still in development and has yet to reach its true potential, this seems to be the future not only of the Internet but also of digital banking.
Large companies such as Microsoft, Meta, Google, and Epic Games have been working on new applications that can function in this environment.
But the metaverse isn’t just a big opportunity for the tech giants: Banks will play a key role as enablers of virtual transactions, which are expected to multiply considerably.
There are already transactions taking place involving notable amounts of artwork in the form of NFTs (non-fungible tokens), which are digital assets that employ blockchain technology to prevent them from being replicated.
There are also real-estate transactions. In 2021, about $500 million worth of virtual islands changed hands, and sales are forecast to double in 2022, according to data from MetaMetric Solutions, a metaverse consultancy firm.
These digital islands will be a meeting point for retailers wanting to promote a wide variety of goods and services to a global audience, such as avatar clothing, online game products or exclusive concerts. That’s in addition to physical items purchased in the metaverse and delivered to people’s doorsteps.
A study by Gartner predicts that by 2026, at least 25% of people will interact in the metaverse for an hour every day, engaging in activities such as virtual classes, playing games with friends, or shopping.
Recent research by Citi GPS concluded that the metaverse will be profitable and pervasive, potentially reaching a valuation of between $8 and $13 trillion by 2030.
Clearly, this new virtual world will require a reliable economic system to power it forward. It’s expected to bring together different sorts of money —virtual and traditional— such as cryptocurrencies, stablecoins, central bank digital currencies (CBDCs) as well as fiat money.
The Gartner study also reveals that 47% of bank CEOs believe their clients will use the metaverse as an alternative channel for their financial transactions.
Online games, and the purchase of items to optimize the experience, are seen as one of the main use cases for electronic payments in the coming years, because users will benefit from an immersive, multiplayer experience. Although they’re not the only ones.
Developers are working to eventually bring together all sorts of activities within this environment, such as those related to health, marketing, commerce, and design.
Accordingly, Spanish banks such as CaixaBank, Santander and BBVA already have research programs and test products that are expected to operate in the metaverse in the near future. And US-based JPMorgan Chase inaugurated a branch in the Decentraland metaverse, which is one of the most popular virtual reality platforms.
Payments will be the gateway to this universe, through digital wallets that work with cryptocurrencies and cash. More complex transactions such as loans will follow. In fact, there are companies already approving mortgages using NFT as collateral for those wishing to buy digital “land”.
Immersive finance will help enhance customer service, as it opens a 24/7 channel for a closer, albeit remote, mode of communication. Being able to interact with the staff of financial institutions through avatars creates proximity without the need for users to leave home.
Likewise, the metaverse will provide a space for financial education programs, with virtual classrooms available at all times. For example, at the JPMorgan branch, experts use their avatars to give lectures on cryptoeconomics.
It’s also an opportunity for the financial industry to further develop products, processes and solutions with blockchain technology in a secure manner.
In addition, companies will also be able to reach new customers, as the metaverse eliminates geographical barriers while generating an important source of customer data that’s essential for product personalization.
All of this creates a challenge for the banking industry: being prepared.
The importance of investing in research and development of products adapted to this environment should also be given due consideration.
First, it’s essential to address security and implement tools to identify users effectively.
At the same time, the more people join the metaverse, the more it will expand, creating confusing boundaries between data openness and user privacy. Entities will have to find the right balance between promoting the use of data and retaining their customers’ trust.
Financial education is another factor that has to be analyzed and addressed to ensure a proper inclusion of all social groups.
This new world promises to break down physical and digital barriers, creating a meeting place where everyone can interact, buy, sell, and create products and services.
As a result, the metaeconomy will continue to grow and with it, the need for flexible organizations that help people use their resources in a way that’s instinctive, efficient, and agile.