By Sandeep Budki
From customers standing in long queues to withdraw money to UPI transactions, banking has come a long way. With banks missing a large part of the action during the transition. Ironically, it’s not as if banks held back on investing in technology. The problem for them has been investing in technology where the return on investment is ambiguous. Now, there is a new technology knocking on banks’ doors — metaverse. Though the hype is running ahead at times, the metaverse does seem to have the potential to disrupt a wide range of industries, including banking. For example, it could enable virtual banking branches, immersive educational experiences, and virtual financial advisor interactions.
Rajesh Dhuddu, global head, Blockchain & Metaverse Practice, Tech Mahindra, said, “Metaverse is a new paradigm that is powered by a combination of multiple next-generation technologies such as AI, 5G, Blockchain, NFT, Web3, AR/VR, network services, and spatial computing. While decentralised technologies such as NFT, Blockchain, and Web3 provide a resilient infrastructure and secure exchange approach, immersive technologies such as AR/VR provide an enhanced virtual experience.”
In his opinion, metaverse can enable banks to redefine previously limited modes of customer engagement such as branches, internet banking, and mobile banking with a richer and elevated experience through enhanced immersiveness and interactivity. For instance, in virtual banking branches, customers can conduct transactions and speak with representatives in a virtual setting. On its part, the bank can have intelligent avatars and AI-enabled chatbots to assist customers in managing their funds more effectively and advising on new, innovative products for investment.
Additionally, the metaverse could also be used to facilitate virtual trading and management of assets, such as real estate or art, through non-fungible tokens (NFTs) and decentralised finance (DeFi) platforms.
“Banks can also use metaverse to streamline their internal processes,” Dhuddu said. For example, banks can leverage the metaverse to onboard, orient, and train new employees in an immersive and interactive 3D environment rather than having day-long virtual workshops, which can be cost-prohibitive and a potential operational nightmare.
What is holding back its adoption?
As with any technology, there are also potential drawbacks to using the metaverse in banking. For instance, the lack of regulation. This could create risks for customers and banks, as there may be no legal framework to protect them. The apex regulator, RBI, can take very long to move, which could allow fintechs to steal the market from the banks again.
Then comes the issue of complexity. The metaverse is a complex technology and its implementation in the banking industry will be both difficult and expensive, considering the need to manage issues of security as well as safety. Also, there is the security angle to it. Using the metaverse in banking could create new security risks, such as cyber-attacks on virtual banking branches or the theft of virtual assets. Plus, how widely consumers and businesses will adopt it remains a mystery, as too many variables impact these moves.
The present scenario
There have been a few notable banks that have ventured into the metaverse globally. JP Morgan Chase has set up shop in Decentraland Metaverse. It has created a lounge area, Onyx, where users can learn about JP Morgan’s blockchain initiatives.HSBC has recently purchased LAND in the Sandbox Metaverse to interact with e-sports fans.
In India, metaverse adoption will still be seen through the lens of immediate ROI generation. But having said that, the Union Bank of India (UBI) was the first traditional bank in the country to explore the metaverse. It has taken a phase-wise approach to completely re-inventing the customer experience through the use of the metaverse. Tech Mahindra created a virtual meta-lounge for UBI, branded as “Uni-Verse,” which enables the bank’s customers to enter the meta-branch by logging in with their phones via a web-based interface and access information on products and services that the bank has to offer.
Mumbai-based fintech company Kiya.ai has also recently launched Kiyaverse, a virtual interaction platform for banks and non-banking finance companies (NBFCs). In the first phase, the banking metaverse is offering services such as virtual relationship managers, peer avatars, and Robo-advisors. In the future phases, the company plans to offer NFTs as tokens and support central bank digital currencies (CBDCs) as well.
The way forward
In spite of the buzz, metaverse as an emerging technology comes with high barriers to entry, as it requires a significant investment in terms of resources and expertise, the latter not always available yet. With its high regulatory overhang and need to handle all data carefully, banking will need to see a lot more use cases before making a decisive shift towards it.