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While seeing unprecedented growth in both value and use in 2021, cryptocurrency still remains volatile, and, for the most part, outside of the mainstream financial world. But the emerging metaverse is about to change that; it will be this new generation
of the internet, encompassing VR, AR and other immersive technology, that finally leads to the regulation and wide-scale adoption and stability of cryptocurrencies.
With signs that this is already underway, financial institutions need to prepare for and plan on integrating crypto and the metaverse into their business models and services or they risk being left out of a potentially huge new part of the economy. More
than anything, it will be banks’ long-established brands and large customer bases that will help guide them as they navigate a transition to the crypto-fueled metaverse economy.
The metaverse economy saw more than
$20 billion in retail sales in 2020, and these crypto and stable coin transactions are growing about 40% a year. While many of these transactions have been limited to digital art and virtual
luxury fashion items or skins, with Dolce & Gabbana selling recently a collection of mostly virtual-only items for $5.7 million, this is just the beginning of the exploding use of digital assets as a store of value. The more people use digital assets in
the metaverse, the more they will use them for other activities such as sending money between friends, paying for physical goods or backing up real-world assets. This explosion of crypto use, including in the metaverse, is one of the forces behind discussions
about regulating crypto, which would no doubt bring it more stability and closer to the mainstream financial system.
But banks should not wait for regulation. They should be making moves toward this new metaverse economy now. Here are some guiding principles:
Embrace Legacy: Leverage Trust and Brand Recognition
Banks are some of the most trusted institutions, with a majority of those surveyed
trusting financial institutions at a higher rate than the government. There is, therefore, massive potential for banks to tap into their customers’ growing interest in crypto and in storing value in digital assets. And it is no longer just younger generations
who are using crypto; in fact, 45% of crypto holders in the baby boomer generation used it to make a purchase in
2021.
For now, this means assisting, where regulations allow.
Mastercard now processes crypto payments, showing how a traditional financial institution is catering to consumer demand to use crypto, but still keeping them within the network and brand. And
U.S. Bank recently became the latest leading player to offer custody services, showing that there is a strong desire for funds that deal in bitcoin to have a bank’s name backing them up.
Breaking into crypto by processing payments and offering custody services will help banks prepare for the future when digital assets are fully involved in traditional financial transactions, like mortgages and loans, and the trading of equities.
Another opportunity for banks to leverage their known brands may lie in the field of risk management and user verification, especially as more people rely on peer-to-peer cryptocurrency transactions and would like to be able to trust sources of payment.
Serve Customers: Embrace Metaverse Payment Platforms
As the metaverse and its shopping options are expanding so is the need for digital platforms to process these financial transactions – both in that world and in the real world. For example, Meta, formerly known as Facebook, has recently launched a
pilot that allows people to use Whatsapp to send value from a digital wallet to others, offering benefits like international transfers without fees.
There is an opportunity here for the financial sector to provide these platforms or help their customers use them by opening up bank APIs to allow users to connect their bank accounts to such payment apps. But these emerging apps will not be confined to
phone or laptop screens; they will need to be integrated into the various VR and AR systems that will make up the metaverse.
Like in the traditional fintech world, where banks are behind many payment apps that don’t have their own banking licenses, they will also benefit from taking a similar white-label approach in the metaverse. There is too much value being moved in the metaverse
for banks to ignore it.
Meet Customers Where They Are: Integrate with VR and AR Platforms
In addition to providing platforms that can be used for payments in the metaverse, banks need to think about ways to increase their presence in general in this world and how to better serve customers who will be spending more time there. Customer service
and communications with customers should include, where appropriate, AR and VR technology. For example, with the use of VR glasses, customers will be able to do banking and finance anywhere and in a much more immersive way than is now possible on a phone app.
Banks and financial institutions should also realize that millions of people are spending time on metaverse platforms, whether they are games or virtual concerts or real-estate sales channels. These are all extremely visual and immersive, which means there
are new opportunities for
advertising, from digital billboards to partnerships with celebrities, whose avatars will speak to potential customers.
It is true that there are still a lot of unknowns about the emerging metaverse, and trying to predict what exactly it will look like, or how it will affect us, is impossible. For financial institutions, the key will be not just waiting for regulation, but
determining how they can take their unique attributes – brand recognition and trust — and leverage them in the world of the metaverse. Using their brand recognition and trust, along with meeting customers’ needs, including their desire to participate in the
crypto and metaverse economies, will go a long way in helping banks successfully navigate the transition, no matter what this new world looks like.
Financial Services
