When Neal Stephenson coined the term “metaverse” in his 1992 science-fiction novel, Snow Crash, he could hardly have foreseen that the phrase would be everywhere by late 2021. With bigtech giants like Tencent, Meta and Microsoft all making big bets on the metaverse, there is little doubt that the internet is on the verge of an evolutionary leap.
In this new phase of the internet, it will evolve from a disparate collection of sites and apps into a persistent 3D environment where moving from work to a social platform is as simple as walking from the office to the movie theater across the street. Beneath the user experience of inhabiting a digital world with a sense of presence, the next generation of digital technologies make it all possible with a data framework that generates veracity, scarcity, and even trust.
Just like the real world, this virtual world where people can transact and own or lease digital assets will need financial services. Therein lie exciting opportunities for banks to enable payments, investment, insurance and loans in the metaverse economy. But the potential doesn’t end there—the metaverse also offers banks the opportunity to put the humanity back into banking.
In today’s digital world, digital banking is functionally correct but emotionally devoid. Think of when you were a child, and your parents took you to your bank branch to get your first card or savings book. That was an exciting experience that may well have started a lifetime relationship with your personal bank. What will future generations first memories of banking be?
The empathetic and meaningful conversations we had in the past have been lost, along with much of the customer’s trust in banks. In addition to the huge potential for product and service innovation, the metaverse is an opportunity to restore the dialogues that have been lost in digital channels—to create memorable experiences for the next generation of banking customers, many of whom may never need to step into a banking branch in their lives.
Little wonder that banks are excited by the metaverse’s possibility to transform everything from the basics to the future of business. We cannot be certain how this new channel will evolve in the years to come, but few are disputing that the change will be rapid and far-reaching. Banks cannot afford to stand by and watch it unfold; they need to start exploring its potential and getting ready to scale rapidly to create great new customer and employee experiences.
In this guide
- What is the metaverse?
- What defines the metaverse?
- Are Web3 and the metaverse the same thing?
- Why now? Is there more to the metaverse than hype?
- What is the metaverse business opportunity for banks?
- What are the benefits to banking in the metaverse?
- How will the metaverse transform the relationship between banks and their customers?
- What is an NFT and why should banks care?
- Are there banks in the metaverse?
- What are the risks of the metaverse for banks?
- Where should a bank start its exploration of the metaverse?
- Which skills will banks need for their metaverse deployments?
- What does the metaverse mean for payments?
- The takeaway for banks
What is the metaverse?
The metaverse is the next evolution of the internet experience, which enables people to move beyond browsing the web towards participating in or even inhabiting a persistent shared experience that spans the spectrum of our real world to a fully virtual world and in between. Built on technologies such as augmented reality (AR), virtual reality (VR) and the blockchain, the metaverse is a place where people can meet and interact, and where digital assets (land, buildings, items, avatars and even names) can be created, bought, and sold. For example, imagine shopping in a 3D retail store, attending a sporting event right at midfield, entering an immersive meeting or conference with co-workers or visiting a financial advisor at a bank branch—without leaving your home.
What defines the metaverse?
As the next evolution of the Internet, the metaverse will be a continuum of rapidly emerging capabilities, use cases, technologies and experiences. We see the metaverse bridging physical and digital identities, properties and spaces, and spanning the full spectrum of digitally enhanced worlds, realities and business models. It applies across all aspects of business, from consumer to worker and across the entire enterprise; from reality to virtual and back; from 2D to 3D; and from cloud and artificial intelligence (AI) to extended reality, blockchain, digital twins, edge technologies and beyond.
Are Web3 and the metaverse the same thing?
The Web3 and the metaverse are not the same thing. Web3 refers to a decentralized internet, one owned and controlled by its users and builders rather than by governments and corporations. It represents the third major evolution of the internet, after the worldwide web (Web1) and the social web (Web2). The metaverse refers to the user experience and new ways of interacting with the Internet, rather than the underlying technical architecture.Web3 is built on distributed technologies like blockchain and decentralized autonomous organizations rather than on centralized servers. It’s about using a network made up of the smartphones in each of our pockets and the PCs on our desks to process transactions and record information rather than relying on servers to do the job. On Web3, you could send a message, for example, without going through WhatsApp’s servers.
According to the Accenture Technology Vision for 2021, 84% of global banking executives agree that the realization of Web3 over the next decade will fundamentally change how businesses engage with users online.
That doesn’t mean Web1 and Web2 will disappear. Web3 protocols and multi-party systems are likely to co-exist alongside centralized platforms in the metaverse. These protocols and systems may play an important role enabling users to own a digital identity (or avatar), exchange digital currencies, own persistent digital items of value such as non-fungible tokens (NFTs), and bring digital things from one place in the metaverse to another.
Why now? Is there more to the metaverse than hype?
Accenture has been working with clients on metaverse related technologies and capabilities for nearly 15 years, so it’s by no means a futuristic concept. The convergence and maturation of these technologies may bring its full potential to life faster than many people imagine. Things are moving rapidly and banks that are not thinking about their strategy risk falling behind. Those that are thinking big, experimenting on a small scale while getting ready to ramp up at speed, will gain an early advantage that will stand them in good stead in the long run.
What is new about the metaverse is how its building blocks are being combined to create a new, more immersive internet experience than was previously possible. These building blocks Include:
- Converging device technologies
- Digital identity technology
- Multiparty systems and distributed computing technologies
- Abundant computing power
- Emerging protocols and standards
- Rapidly expanding bandwidth
The building blocks are at different levels of maturity, but we are seeing rapid advances in even the least mature of them. VR headsets, for instance, are following the same path to commoditization and miniaturization as we saw unfold in the smartphone market. A full Oculus Rift VR system cost $800 in 2016; today, Meta offers the far more streamlined, all-in-one Quest 2 headset for $299.
That said, the evolution of the metaverse is likely to unfold over at least five to 10 years. In addition to the remaining technology barriers, organizations will need to address standards for interoperability between platforms; regulations and ethical concerns around data privacy, fraud and IP ownership; and the need for high-quality content and experiences.
What is the metaverse business opportunity for banks?
Goldman Sachs and Morgan Stanley estimate that the metaverse economy could be worth as much as $8 trillion. Banks are among the brands best positioned to answer the growing demand for digitally native currency and identity in the metaverse. But in addition to the dollar value of the emerging metaverse economy, banks have the opportunity to use AR/VR and other technologies to reimagine how they connect with clients and employees.
In the metaverse, banks could deliver advice and build relationships at a time when banking has become commoditized and drained of emotional salience. The metaverse could put the humanity back into the conversation in ways that would simply not be possible in app alerts or text messages. Some 47% of bankers believe that customers will use AR/VR as an alternative channel for transactions by 2030.
What are the benefits to banking in the metaverse?
Banks in the metaverse will benefit from a host of new opportunities—from providing the payments rails that power transactions in the virtual world and reimagining transactions for a 3D world to engaging with employees in new ways, attracting young talent and finding new, more human ways to connect and engage online with their customers.
Reinvent existing customer and employee experiences
Banks will be able to leverage AR and VR technology to create customer and employee experiences in 3D.
- Metaverse banking: Offering customers the ability to check balances, pay bills, make transfers and transact using AR / VR channels.
- Employee experiences: Delivering immersive learning experiences in the safety of simulated customer environments or onboarding remote workers in ways that create fun, connection and a sense of community.
Engage with customers in new ways
Banks can reimagine how they connect with customers, offering personalized advice, delivering empathetic service and building trust. Customers could interact with an avatar at home or visit a real-world branch that offers metaverse experiences.
- Personalized interaction: Providing high-touch service for customers looking for sophisticated products. Delivering personalized financial advice such as virtual annual portfolio reviews, financial planning sessions and product recommendations such as mortgages.
- Marketing and brand extension: Virtualizing familiar brand interactions, such as withdrawing cash from an ATM, branch placement, branding and endorsements. Also bringing environmental, social and governance credentials to life in a more vivid and emotive way.
68% of global banking executives believe programming the physical environment will emerge as a competitive differentiation in the banking industry—Accenture Technology Vision 2022
Invent new products and services
There are opportunities for banks to tap into the metaverse’s burgeoning economy with novel banking products and services as a source of growth.
- Digital payments: Facilitating secure wallet functionality and payment rails for metaverse products, services and economies.
- Digital assets: Banks can extend their role as custodians of customers’ assets to the metaverse by securing, insuring and lending against cryptocurrency, NFTs and virtual real estate.
- Digital twins: Recreating a virtual twin for an asset or property like a home or bank branch. Imagine touring a perfect VR recreation of a home you might be interested in buying rather than simply browsing 2D photos and video. A bank employee could use the digital twin for underwriting the loan.
How will the metaverse transform the relationship between banks and their customers?
The metaverse brings together people, spaces and things in both the virtual and real worlds, offering banks an opportunity to evoke a sense of community and collaborative engagement among their customers. Adding a third dimension and a sense of presence to digital banking experiences could bring a more personal and human feel to remote and virtual customer interactions. For example, a customer could have a more engaging experience with a service representative or advisor represented by a realistic avatar than with the screen of a chat application or even a videocall.
To heighten trust and create engagement, banks should not expect to simply move into the metaverse, set the terms of engagement and monetize it. Forward-thinking banks will seek to have a transparent two-way relationship, in which customers have input and awareness of the brand’s intentions and objectives. With the relationship to the consumer evolving to more of a partnership, the simple value flows of institution and client no longer work. To establish and maintain trust, banks will need to work to reconfigure how they create and share value.
What is an NFT and why should banks care?
A non-fungible token (NFT) is a tradable digital asset, often used to represent ownership of digital objects like art, music, in-game items and videos. Each NFT is as unique as a digital Picasso—it cannot be swapped for a copy and it can be authenticated as the original. NFTs, in theory, create digital scarcity. Banks may be able to secure, loan against and insure NFTs, just like physical assets. Sweden’s Mercobank is one example of a bank dipping its toes into the water. The bank is piloting a digital asset custody service.
Are there banks in the metaverse?
Banks around the world are sitting up and paying attention to the latest developments in the metaverse. The Accenture Technology Vision survey for 2022 found that 67% of global banking executives agreed that the metaverse will have a positive impact on their organizations, while 38% said it will be a breakthrough or transformational. Around 92% agreed future digital platforms need to offer unified experiences that enable interoperability of customers’ data across different platforms and spaces.
Some first movers in the banking industry are already exploring the metaverse, with the wide range of applications they are experimenting with showing the versatility of the technology. KB Kookmin Bank—one of the biggest financial institutions in South Korea—offers a virtual bank where customers can access personalized financial information and interact one-on-one with its financial advisors in VR.
BNP Paribas, meanwhile, has launched a virtual reality app that enables retail banking users to access their account activity and transaction records in a VR environment. Bank of America offers VR training in nearly 4,300 financial centers nationwide. The training technology allows the bank’s employees to practice a range of routine to complex tasks and simulate client interactions through a virtual environment.
J.P. Morgan has opened an Onyx lounge in the metaverse, a virtual lounge in the blockchain-based world of Decentraland. Similar to its real-world function, the bank can facilitate cross-border payments, foreign exchange, financial assets creation, trading and safekeeping. Onyx is a blockchain-based platform for wholesale payments transactions.
HSBC is investing in a plot of land at The Sandbox metaverse, which it will develop to engage with sports, e-sports and gaming fans. The bank says the partnership with The Sandbox will enable it to create innovative brand experiences for new and existing customers. Gucci, Warner Music Group (WMG), The Walking Dead, Snoop Dogg and Adidas are among the other brands that are working with The Sandbox.
What are the risks of the metaverse for banks?
Just like social media or interactions in the real world, metaverses may well expose brands including banks to a range of reputational and legal risks. The nature or extent of them might be hard to anticipate at this early stage, in much the same way as people didn’t foresee the potential negative impacts of social media via personal abuse and the dissemination of ‘fake news’.
Some of the questions that bear thinking about include: How could the up close and personal ‘sense of presence’ exacerbate the problems we already have with abuse and harassment on the internet? Given the role of NFTs and crypto in the metaverse, what new risks should banks anticipate around money laundering and fraud? And what are the privacy risks attached to tracking and retaining the richer data banks may be able to gather from customers in the metaverse?
Trust will be paramount to adoption of the new experiences banks and other brands are beginning to build. For these reasons it is imperative that the metaverse is developed with responsibility at the core. From ownership of data to inclusion and diversity, to sustainability and risk management, and through to security and personal safety, this work must begin now.
The concerns regulators and consumers already hold today around privacy, bias, fairness, and the human impact of digital platforms will become more acute as the metaverse further blurs the line between people’s physical and digital lives. Banks should prepare for high levels of regulatory scrutiny of the metaverse and be ready to respond rapidly to new regulations.
Where should a bank start its exploration of the metaverse?
The metaverse is early in its development, and as with most transformational technology it is difficult to identify when and where it started or to predict when it will reach its end-state or what its final form might look like. However, banks should be prepared for a similar trajectory to mobile banking, which took around five years to fully diffuse into banking.
A good starting point is to scan the market and technology landscape to understand how it is evolving, as well as the available opportunities and partners. Banks could also evaluate their technological readiness for the impending changes. Mature cloud deployment is a must. There may be scope for more targeted investment in VR, AR, distributed ledgers, and virtual marketplaces.
Banks can also investigate which metaverse use cases they can leverage without high levels of cost or risk. For instance, using VR for training has been tested for years. Banks may also be able to start preparing for the metaverse by enabling 3D experiences, before looking at ways to use immersive technologies to transform how they interact with customers and employees.
Which skills will banks need for their metaverse deployments?
In the same way as banks needed to hire user experience designers, cloud architects and software engineers to execute their digital transformations, they will need a new set of skills for a future driven by metaverses. These skills may include 3D artists, game designers, platform experts, and professionals with expertise in multiple blockchains. It is essential to start developing a pipeline of talent today.
Banks can start by identifying where they expect to compete, and what skills gaps will prevent them from successfully executing those strategies. This should be a long-term effort that encompasses both recruiting from the outside to fill the gaps as well as upskilling existing employees through vendor-based training and building their familiarity and skills with metaverse platforms the bank intends to use. Low-code and no-code platforms can help to jumpstart metaverse initiatives.
What does the metaverse mean for payments?
Right now, consumers can spend money in the metaverse in different digital worlds. Most of these are “closed” in the sense that money can go in but it can’t come out.
For example, in the summer of 2021 a digital Gucci handbag was sold in the online game Roblox for $4,115—more than its real-world counterpart. Since Roblox is a closed digital world, the owner of that bag cannot take it anywhere else in the metaverse.
“Permissioned” platforms like Horizon Worlds retain legal ownership of all goods on their platforms. Users can still sell “their” goods, but the sales fees are many times higher than those on “permissionless” platforms like Decentraland, where the users hold actual legal custody of their digital assets.
Regardless, ownership of assets in these open worlds is not managed by a central authority in the open parts of the metaverse. Instead, it’s recorded on a public blockchain. Most of the potential for payments in the metaverse centers on the blockchain, which underpins digital assets like cryptocurrency and non-fungible tokens (NFTs).
Blockchain in the metaverse creates intriguing possibilities for payments players. Customers could access digital ATMs in the metaverse that are linked to their real-world bank accounts. They’d use their real banking PINs to pull real money out of their real accounts and put them in their digital wallets.
But they could put much more than just fiat currencies like euros or pounds in their metaverse wallets—including cryptocurrencies and other digital assets like NFTs.
As these digital assets become more widely understood and used, the demand and value for banks to ensure the safekeeping of these assets will increase materially. Banks that have not developed an approach to digital asset custody are already taking a risk.
Systems to send and receive payments that bridge this mix of currencies and assets, both within the metaverse and between the metaverse and the real world, are still theoretical at this point. When they arrive, they will create significant new opportunities in payments.
The takeaway for banks
Banking is on the threshold of a new decade of digital transformation, one that may prove to be as meaningful as the birth of the Web and the mobile revolution. The metaverse is a significant technology shift, but also so much more than that. Its potential magic lies in how it will enable banks to rebuild community and reignite conversations with their customers. The metaverse will bring us back to the future of banking. Here, banks will be able to thrive by delivering the level of personalized service and deep emotional engagement that characterized branch banking in the predigital era.
The metaverse promises to eliminate the friction that exists between today’s many digital platforms and to reinvent how data moves and is used across digital experiences. It will radically change how banks interact with customers, what products and services they offer, how they make and distribute them, and how they operate their organizations. In this process, the metaverse will create new industries and new ways of working and engaging with others.
This is a defining moment for banks. Leaders need to step back and rethink their business for the next decade—the role which the internet will play, the worlds they will define and design, and what their digital future holds. These are early days, but the metaverse will take shape and advance very quickly. Banks that don’t act now will find themselves operating in worlds designed by, and for, someone else.
To learn more, we recommend exploring these resources:
- Banking in the metaverse: The next frontier
- Accenture Technology Vision 2022
- The metaverse continuum
To discuss how Accenture can help you respond to the opportunities presented by banking in the metaverse, please get in touch.
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