While the rest of the world watches as the US SEC declares war on Crypto and all of its major players, the world’s leading financial institutions seem to have their eyes elsewhere at the moment: The Metaverse.
For the uninitiated, the Metaverse can be broadly defined as an evolving virtual world powered by blockchain technology that offers immersive social experiences. Unlike any single company or application, the metaverse represents a collection of interconnected virtual spaces that provide unique opportunities for connectivity and creativity, enabling users to connect and communicate like never before. This decentralized ecosystem is what unlocks new possibilities for social interaction in a digitally interconnected realm, and encourages Metaverse environments to thrive.
Although it’s no longer the hot trend it once was, the Metaverse presents a unique opportunity for banks and financial institutions to tap into a young, tech-savvy user base that is in the early stages of their financial lives, and it looks like the Banks are finally beginning to notice.
By embracing the Metaverse, banks can forge connections with a digitally native consumer base, establish themselves as innovative players in the evolving financial landscape, and tap into a talent pool that holds the key to future success.
TradFi on the metaverse and Web3
Financial giants from various parts of the world are taking advantage of that opportunity, with multiple leading institutions in TradFi recently establishing a presence in the Metaverse. JPMorgan, operating as Onyx, has set up shop in Decentraland, and HSBC made waves last year by acquiring land in The Sandbox, aiming to connect with customers and provide unique experiences through emerging platforms.
To add to the list, Kookmin and DBS, two of Asia’s banking powerhouses, have also joined the Metaverse movement, introducing a range of services tailored to the virtual realm. Kookmin Bank, based in South Korea, has launched its own metaverse-based financial services and also plans to incorporate employee training and financial education programs for young individuals.
Meanwhile, DBS, Singapore's largest bank, has made a significant investment by acquiring a sizable land parcel in The Sandbox. The bank aims to create interactive experiences within the metaverse that promote sustainability and raise awareness about crucial environmental, social, and governance (ESG) issues.
In Canada, The Toronto-Dominion Bank (TD) and Royal Bank of Canada (RBC) are actively exploring the metaverse through pilot programs to gain a deeper understanding of the technology and, hopefully, stay ahead of the game. TD's pilot program, conducted from January to April this year, focused on customer experience and aimed to test and evaluate immersive services within the metaverse.
Prepping for Web 3
Beyond the superficial aspects of virtual furniture and buying pixelated land, banks are also recognizing the need to equip their financial advisors and wealth managers with the knowledge and skills to navigate Web3-based financial products.
The focus on Web3 shows a shifting dynamic in the financial industry, with a growing interest and adoption of digital assets among high-net-worth individuals (HNWIs). This is highlighted in a recent report by Capgemini titled "Wealth Management Top Trends 2023," showing that a significant 70% of HNWIs worldwide have ventured into digital assets as part of their investment portfolio. Even more notable is that more than nine out of ten HNWIs below 40 have embraced cryptocurrencies as their preferred asset class.
The Future of Banking?
The growing list of initiatives shows an increasing interest from banks in exploring Web3 opportunities and engaging with the metaverse ecosystem and further shows that the emergence of the Metaverse has significant implications for the financial services sector, marking a new phase of evolution in banking and capital markets.
To address the new demand, the industry will have to adapt by developing digital initiatives to effectively guide its clients in making informed investment decisions. And with physical bank branches shutting down at unprecedented rates, it makes sense that those staying ahead of the curve and looking into the Metaverse will be the best placed to provide the future of banking services.