Banking operating model in the metaverse

The rise of Web3 has been observable worldwide since 2021 and seems unstoppable. NFTs have transformed the art market, and cryptocurrencies have provided the framework for the entire emerging and thriving economy. According to a Gartner report, 25% of people will spend at least one hour per day in the metaverse for work, shopping, education, socialising, and entertainment by 2026.

Metaverse Market Growth Outlook

The virtual world, where people can transact and own or lease digital assets, will require financial services, just like the real world. There are exciting opportunities for banks to enable payments, investment, insurance, and loan services in the metaverse economy. Crypto, NFTs, and future digital assets will form the metaverse's foundation, and are poised to play a huge role in metaverse payments.

The ultimate objective is to provide truly integrated financial services with a completely agnostic banking experience, from the most basic and inclusive interfaces to voice interactions powered entirely by AI and chatbots. For example, MetaVRse members are working together to build a financial ecosystem based on blockchain technology that can provide innovative solutions like user-controlled digital identities, registration services, and KYC compliance through crowdsourcing mechanisms. Using advanced cryptography and AI technologies, this project aims to deliver an open metaverse infrastructure platform with higher levels of privacy protection than existing public blockchains.

This could open up new possibilities for delivering financial services in the metaverse, including traditional banking services and those involving digital and cryptocurrencies. Furthermore, technology will support both existing products and future products for the metaverse. It's an opportunity for banks to get ahead of the curve by spotting trends in the metaverse.

Metaverse finance (MetaFi) is mostly a hybrid of decentralised finance (DeFi), centralised finance (CeFi), and traditional finance (TradFi), with new products tailored to the specific requirements of the new ecosystem.

Banks can extend their role as custodians of their customers' assets to the metaverse by securing, insuring, and lending against cryptocurrency, and NFTs.In the metaverse, the digital currency may take on new meaning as users may be able to pay in cryptocurrency. The addition of on-ramp cryptos will allow consumers to accept fiat payments to purchase NFT or other crypto assets directly in metaverse banking. Banking customers can exchange real-world money for cryptocurrency coins and spend cash on the digital asset. On the other hand, one can spend cryptocurrency on something in the real world that isn't available through the metaverse.

Metaverse Wallet for Open Finance

Banks can identify potential customers, onboard them using cryptocurrency wallets, and provide payment, lending, and various other services. For example, The bank customer can attach their "NFT personal identity" to a digital wallet that contains both the fiat currency and cryptocurrency. At the same time, they can avail decentralised financial services with the help of the metaverse.

Banks, including HSBC, Standard Chartered, and JP Morgan, are purchasing metaverse land to reach a new demographic of tech-savvy customers. J.P. Morgan is the first bank to formally enter the metaverse by opening its virtual Onyx Lounge in Decentraland's Metajuku mall. In addition, HSBC announced a collaboration with the 'Sandbox metaverse' in which the bank will build a virtual stadium and interact with the community.

The metaverse has the potential to significantly improve the banking sector services by influencing how banks interact with their clients, develop new products, and enable services.Banks can extend financial embedded services along with hybrid operating models of fiat and cryptocurrency in the metaverse.