A Google search for "metaverse" results in roughly 203 million results – an overwhelming number of options for learning more about an emerging digital world.
But what exactly is the metaverse? And what does it mean for financial institutions now and in the future?
As I shared in a recent article, the metaverse is a vision, not just a technology. It's a virtual world driven by the thriving global gaming culture that lets people create an entirely virtual version of themselves.
In that world, users create and pursue unique experiences. Much like the real world, some form of currency is necessary, providing opportunities for banks and credit unions.
At SRM, we are learning more every day about the metaverse. With that in mind, here are five things you should know – and a promise to deliver more specific content on this topic as use cases and opportunities evolve.
- The metaverse is disjointed today, but it's likely to unite
The metaverse isn't one entity or run by one technology company. Rather, multiple metaverses exist with various owners and creators. You know many of the largest operators – Meta (formerly Facebook), Microsoft, Apple, etc. Other worlds, such as Decentraland and The Sandbox, attract millions of gamers, brands, and cultural icons.
As demand increases and commerce adapts to it, there's an expectation that an open, interoperable metaverse will emerge.
- The metaverse economy is built on crypto wallets
A layer of financial infrastructure exists in the metaverse, dominated by well-known fintechs and crypto exchanges such as Coinbase and crypto.com.
The metaverse has a very real economy, and transactions are plenty. Goods are exchanged, purchases are encouraged, and experiences are acquired. To make those purchases, you must show proof of a crypto wallet. So, starting with a sound crypto strategy and product offering at your institution will be critical for the baseline opportunity in this economy.
A centralized digital currency could also emerge, mimicking prior cryptocurrencies.
- Several financial institutions are already in the game
Not surprisingly, prominent names in consumer banking, including JPMorgan Chase (owner of the Onyx Lounge in Decentraland) and HSBC, have made the first entry into the most popular metaverse platforms. They possess not just the budget but the specific internal skillsets to develop their presence in the metaverse.
Virtual branches, storefronts, and sponsorships are all popping up. Staying connected, understanding your options, and incrementally establishing a brand presence is a smart start. A generation of digital natives will be raised on virtual reality and the metaverse, allowing financial institutions to introduce financial life products to this group seamlessly in the years ahead.
- Virtual land is a real economy
Major brands and celebrities are buying virtual land in the metaverse, staking their claim to be visible in this evolving experience. Property in the metaverse has quickly appreciated based on the popular platforms projecting scarcity of space. In fact, a buyer paid $450,000 for land adjacent to rapper and celebrity endorser Snoop Dog.
Once land is purchased in the metaverse, it's the equivalent of an NFT (non-fungible token) on the blockchain, establishing encrypted ownership. It would be wise for financial institutions to understand the changing value of real estate in the metaverse.
- Lending could be a significant opportunity
The sale of virtual real estate in the metaverse inevitably brings the prospect of lending. While fintechs will also try to compete in this space, banks and credit unions know this offering intuitively and could uncover an opportunity.
When aspiring entrepreneurs look to make their mark in the metaverse, they may turn to financial institutions for lending needs – a form of "metaverse mortgage" – to purchase their plots and develop their experiences.
The Bottom Line
As with all emerging technologies, levels of risk and uncertainty exist when discussing the metaverse and your potential role or investment in it. There is, however, an opportunity for banks and credit unions to play a critical role in enabling an entirely new financial experience. At SRM, we believe education, trend-tracking, and strategic planning are wise moves when planning for what lies ahead. We will continue to follow developments and use cases in the metaverse closely and provide you with the information you need to know.