No longer are people required to wait until lunchtime to get their banking inquiries addressed or to visit the bank multiple times to get their loan approved. Digitization has taken over, with credit disbursement happening in a shocking two-minute time frame.
However, the Metaverse has recently come onto the scene and caught the attention of many industries, including banking. Since the pandemic, individuals have been hesitant to leave the comfort of their homes, and Metaverse takes full advantage of this.
Imagine depositing money into the bank without going to the branch. Avatars such as the bank manager, your relationship manager, and other bank staff could guide and engage with you in a virtual setting from the comfort of your couch, providing an immersive experience without stepping out of your house.
Isn’t this exciting?
With the rise of blockchain technology and virtual reality, the banking industry faces a new wave of disruption. The emergence of the Metaverse, a decentralized platform for the exchange of digital assets and services, has the potential to revolutionize the way banks operate.
By leveraging the power of blockchain and virtual reality, the Metaverse could create a secure, efficient, and transparent platform that would reshape the banking industry.
Research has shown that India could experience an economic boost of between $79 and $148 billion annually by 2035, making up 1.3 to 2.4 percent of the nation’s GDP.
With the world’s most science, technology, engineering, and math graduates and a population mostly under the age of 30, India is in an optimal position to provide digital work to the Metaverse.
Studies suggest that Asia could gain between $0.8 and $1.4 trillion yearly because of the Metaverse, which would be around 1.3 to 2.4 percent of their GDP.
This article will explore the opportunities, challenges, and solutions that the Metaverse could bring to the banking industry. It will also discuss how banks can leverage the technology to gain a competitive edge and stay ahead of the curve.
Finally, it will address the steps banks can take to ensure a successful transition to the Metaverse. By understanding the potential implications of the Metaverse and the solutions it could provide, banks can capitalize on the opportunities it brings and stay ahead of the competition.
What is the Metaverse, and how will it reshape the banking industry?
The Metaverse is a decentralized, open-source platform built on the blockchain that allows people to create, publish, and transact easily and securely. It is a virtual reality blockchain network that allows for creating and distributing virtual items and services for various industries, including virtual education, health, entertainment, gaming, and more.
The Metaverse allows digital assets like currencies, real estate, and stocks to be created as non-fungible digital tokens on the blockchain. These digital assets can be traded seamlessly between users, validated by other users, or transferred to a smart contract through a decentralized network without an intermediary.
The Metaverse has the potential to reshape the banking industry by providing a decentralized network for the exchange of digital assets and services.
Opportunities the Metaverse offers
A secure digital identity — Identity theft is a primary concern for banks and their customers. Digital fraud and identity theft cost the banking industry billions of dollars annually. On the Metaverse, a user’s digital identity is stored on the blockchain and secured with government-approved data encryption. This decentralized system provides a safe and secure digital identity for users, which banks can use as a verification tool for KYC.
Transparent and efficient transactions — With the decentralized network and distributed ledger of the Metaverse, banks can operate with a secure and transparent blockchain for financial transactions. It can also be used to process the creation and distribution of digital assets and services.
Supply chain management — The blockchain of the Metaverse can be used to track the movement of goods and services through the supply chain to ensure product quality and regulatory compliance. This can help banks improve yield and customer satisfaction by providing transparency throughout the supply chain.
Challenges of the Metaverse
Centralized authority — The Metaverse is decentralized and open-source, but it does rely on a few centralized institutions for identity authentication and initial capital investment. This can make it vulnerable to fraud.
Lack of regulatory compliance — The blockchain is a distributed ledger that eliminates the need for a centralized third party. This also means that any one entity does not govern the blockchain. As such, the Metaverse is not subject to any regulatory compliance. This can make it difficult for banks to meet regulatory requirements.
Slow transaction speed — Although the blockchain of the Metaverse is secure, it is not scalable. This means that it is only able to process a few transactions at the same time. This can be problematic for banks that conduct many high-volume transactions.
Solutions to the challenges
Centralized authority — Banks can use the Metaverse’s decentralized identity authentication protocol to secure their digital assets and services within the blockchain. This can prevent fraud and ensure regulatory compliance.
Lack of regulatory compliance — Banks can integrate the Metaverse’s decentralized smart contracts to govern digital asset and service exchanges on the blockchain. This ensures that a set of predetermined rules and regulations handles all transactions on the network.
Slow transaction speed — Scalability is one of the significant issues that blockchain technology is trying to solve. While the Metaverse is currently trying to solve this issue, businesses can also help by conducting fewer transactions simultaneously.
How banks can leverage the Metaverse
Evaluate the technology — Banks should first evaluate the technology behind the Metaverse and its potential for the industry. This can help them determine how the blockchain can be used in their organization.
Invest in the technology — After evaluating the potential of the Metaverse and its blockchain, banks can invest in the technology, acquire the technology company, or partner with the company to leverage the technology.
Identify use cases — Banks can explore use cases of the Metaverse and identify areas where it can be implemented. They can also host hackathons and invite developers to develop innovative solutions using the Metaverse.
Conduct a pilot — Banks can implement the Metaverse to test its scalability, cost-effectiveness, and regulatory compliance. This can help them decide when to scale the implementation and what changes to make it more effective.
Steps to ensure a successful transition to the Metaverse
Define digital assets and services — Banks should define the investments and services they wish to offer on the blockchain. This will help them determine the digital assets and services they should offer.
Establish digital asset strategies — After defining the assets and services, banks should establish procedures for creating and distributing these assets. This can help them create a successful and profitable business model using the blockchain.
Select the technology — Banks should select the technology they want to deploy on the blockchain. This can help them create a blockchain network and start offering services.
Create a pilot — Banks should create a pilot implementation of the blockchain and test its scalability, cost-effectiveness, and regulatory compliance. This helps them identify and resolve issues that hinder the full-scale performance of the blockchain.
Why are banks chasing Metaverse?
The Metaverse is a decentralized, open-source blockchain network that allows people to create and trade digital assets. The Metaverse will enable users to create virtual identities, digital trade assets, and services, send messages, create and participate in virtual worlds, and much more.
The Metaverse was created by an open-source development team based in China, led by Chen Yu-tao, the founder and CEO of Viewfin. The Metaverse blockchain was built on the Ethereum network with an expectation to scale faster and more efficiently than Ethereum. The Metaverse blockchain uses the E-Tron protocol, which is expected to eliminate scalability issues while offering low transaction fees.
What are its use cases in the banking sector?
The Metaverse can be used to digitize assets, manage identity, and conduct transactions for financial institutions. The blockchain of the Metaverse can be used for identity management to create a secure digital identity for users and verify their information.
The blockchain can also be used to issue and distribute digital assets like shares, voting rights, coupons, and currencies. These digital assets can be stored in a digital wallet and traded through a decentralized exchange.
Banks can use the blockchain to manage and track the movement of goods and services through the supply chain. It can also be used to manage compliance, execute smart contracts, and provide transparency.
How can banks capitalize on the opportunities the Metaverse brings? Banks should first evaluate the technology behind the Metaverse and its potential for the industry. They should also invest in the technology and implement use cases for the Metaverse in their organization. Banks can then conduct a pilot implementation of the blockchain and identify implementation challenges that they might face. Finally, banks can follow these steps to ensure a successful transition to the Metaverse and capitalize on its opportunities.