The Future of Banking in the Metaverse

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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.

Notching Customer, Employee Wins Through Process Automation

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Financial institutions are committed to improving digital banking services and enabled more digital capabilities over the past year out of necessity — but there is more transformation to be done.

In their haste to meet customers’ and employees’ needs, many banks overlooked opportunities in back-office processes that are critical to providing excellent customer service, such as operating an efficient Regulation E (Reg E) dispute tracking process along with other processes that can ease employee challenges with regulatory compliance issues.

To enable bank staff to better serve customers, financial institutions must automate their back-office dispute tracking processes. One way to do is through implementing process automation solutions that offer workflows to direct the disputes appropriately, a single storage location for all supporting documentation and automating mundane tasks, such as generating letters and updating general ledger accounts. Implementing this kind of automation enables banks to simplify and streamline their input of disputes, ensuring that all critical information is captured accurately and dispute intake is handled consistently. This allows banks to provide consistent engagement and faster response to their customers.

Back-office automation strengthens a bank’s regulatory compliance and customer engagement. Awaiting outcomes from back-office processes can be extremely frustrating to customers — these moments are often tied to high-stress situations, such as having their cards used fraudulently. Banks should consider how manual, error-prone dispute tracking processes negatively affect the customer experience. Institutions also gain the crucial visibility that supports their decision-making and improves compliance with regulations, mitigating the risk and cost of non-compliance.

Process automation can also eliminate the stress that impacts account holders during this process. Having back-office automation with enhanced workflows and centralized documentation allows banks to return provisional credit more quickly and minimizes errors and delays. Instead of missing deadlines and making mistakes that erode customer confidence and cause audit exceptions, back-office employees meet deadlines and process disputes consistently and accurately, avoiding fines and additional work to remedy errors.

Automation can also improve back-office productivity by enhancing visibility. Clear visibility is created when a back-office employee can immediately track documentation and data when it is needed, at any stage in the process. During an audit, an employee may need to retrieve the date that a customer filed a Reg E dispute or to prove proper credit was applied. Without the appropriate tools, such as a single dashboard for dispute tracking and one platform for all supporting documentation, employees waste time searching paper files, spreadsheets and emails to piece together the required information. A workflow automation platform means a full audit trail with supporting documentation is readily available, optimizing everyone’s time.

For example, automation at Watkinsville, Georgia-based Oconee State Bank enables employees to efficiently complete tasks and focus their attention on serving their customers without being slowed down by complicated processes. The bank reduced the amount of time it took to file consumer disputes by more than 80% through process automation.

With 12 branches across Illinois and Indiana, First Bank, based in Carmi, Illinois, reduced claim processing time by more than 50% and experienced positive impacts from its digital dispute process. Dispute processes that can be easily tracked enable bank executives to clear audits and gain greater visibility into risk and compliance across their institution.

The visibility banks gain through automation improves their decision-making. Hard-to-access information and lack of visibility can be especially defeating when managing risk and compliance. Not only does incorrect or unavailable information open the door for human error, but it can also lead to financial loss. In areas like Reg E dispute tracking, this financial loss can be a result of not identifying a fraudulent dispute or trends of fraudulent charges. Process automation helps by supporting a methodical approach to reducing fraud and increasing visibility of high-risk merchants and customers.

This kind of attentive review during the Reg E process can help banks reduce the amount of undetected fraud and lower their write-off threshold, which is the pre-established amount set by an individual financial institution, under which any dispute is automatically written off as a financial loss. These thresholds are traditionally set with the back office staff’s bandwidth in mind; with more free time, banks can lower this threshold and avoid automatic losses. For instance, after implementing an automated, Reg E dispute tracking solution, Happy State Bank, the bank unit of Canyon, Texas-based Happy Bancshares, was able to lower its write-off threshold from $100 to $50 per dispute.

Tackling process automation can help banks compete and win while improving the level of service provided to customers. This technology empowers staff to be more responsive and alert to trends, enabling better decision-making and saving both cost and time. Implementing process automation allows banks to differentiate themselves from their competitors by providing consistent engagement and faster responses to customers. Process automation is the key to optimizing efficiency within any financial institution.