From Nike’s acquisition of RTFKT to Meta Platform’s Chairman and CEO Mark Zuckerberg playing virtual pingpong, the metaverse has evolved from a buzzword into a way of doing business.
The metaverse could become a “river of entertainment in which the content and commerce flow freely,” according to Microsoft Corp. Chairman and Chief Executive Satya Nadella in “The Coming Battle Over Banking in the Metaverse.” Created by integrating virtual and augmented reality, artificial intelligence, cryptocurrency, and other technologies, the metaverse is a 3D virtual space with different worlds for its users to enhance their personal and professional experiences, from gaming and socializing to business and financial growth.
That means banking may ultimately come to play a significant role in the metaverse. Whether exchanging currencies between different worlds, converting virtual or real-world assets or creating compliant “meta-lending” options, financial institutions will have no shortage of new and traditional ways to expand their operations within this young virtual space. Companies like JPMorgan Chase & Co. and South Korea’s KB Kookmin Bank already have a foot in the metaverse. JPMorgan has the Onyx Lounge; Kookmin offers one-on-one consultations. However, banks will find they cannot operate in their traditional ways in this virtual space.
One aspect that might experience a drastic change is the branches themselves. The industry should expect an adjustment period to best facilitate the needs of their metaverse banking customers. These virtual bank branches will need to be flexible in accepting cryptocurrencies, non-fungible tokens, blockchains and alternative forms of virtual currency if they are to survive in the metaverse.
However, not everyone agrees that bank branches will be that relevant in the metaverse. The idea is that online banking already accomplishes the tasks that a branch located in the metaverse might fulfill. Another issue is that there is little current need for bank branches because the migration to the metaverse is nascent. Only time will tell how banking companies adapt to this new virtual world and the problems that come with it.
Early signs point to a combination of traditional and new banking styles. One of the first products from the metaverse is already shining a light on potential challenges: The purchase and sale of virtual space has significantly changed over the past year. In Ron Shevlin’s article, “JPMorgan Opens A Bank Branch In The Metaverse (But It’s Not What You Think It’s For),” he writes, “the average investment in land was about $5,300, but prices have grown considerably from an average of $100 per land in January to $15,000 in December of 2021, with rapid growth in the fourth quarter when the Sandbox Alpha was released.”
The increasing number of virtual real estate transactions also means the introduction of lending and other financial assistance options. This can already be seen with TerraZero Technologies providing what could be described as the first mortgage. This is just the beginning as we see opportunities for the development of banking services more clearly as the metaverse, its different worlds and its functions and services mature.
Even though the metaverse is still young and there are many challenges ahead, it is clear to see the potential it could have on not only banking, but the way we live as we know it.