JPMorgan Chase released its Summer Reading List last month, an annual tradition for the bank that spans more than two decades. But this year, the bank took a slightly different approach, opting to make this year’s book collection available to visitors in the virtual lounge it set up at Decentraland in February.
The move represents JPMorgan’s bet on the benefits of establishing an early presence in the Metaverse, an immersive world that the bank says represents a $1 trillion market opportunity.
The metaverse, a virtual world that users can explore through the use of virtual reality and augmented reality headsets, is a new model of interaction and engagement for society, said Sandeep Vishnu, partner at the firm of Capco board, and it’s a space the banking industry can’t afford to sit in.
“If the metaverse is a new model for society, for interaction and engagement, then banks need to follow that,” Vishnu said. “Banks need to figure out what role they’re going to play in the metaverse, and moving and being part of the ecosystem early on could give them landing rights that wouldn’t be there if they didn’t move early.”
Like JPMorgan, Quontic Bank takes a precursor approach to the metaverse. The New York-based digital bank opened a Quontic Bank Outpost at Decentraland last month.
To mark the occasion, the bank hosted a virtual launch party for the space, featuring a DJ and a limited giveaway of non-fungible tokens (NFTs).
Quontic’s discussions about building a presence in the metaverse began earlier this year, said Aaron Wollner, the bank’s chief marketing officer.
“We did an effort and impact exercise and felt the effort was relatively low, and the impact could potentially be high — not immediately, but potentially,” Wollner said. “That’s how we sometimes think about the innovative things we do. What is the potential benefit, even if not an immediate impact? »
Digital banking has long aimed to be at the forefront of merging new technologies with the banking experience.
Quontic claims to be the first US bank to offer its customers a Bitcoin rewards programa feature the bank launched in 2020.
The bank also claims that it is the first bank to introduce a tap-to-pay mobile payment ring in the US market, a product it officially launched in April.
Across the metaverse, Quontic is excited about the three-dimensional aspect of hosting a space for its customers, Wollner said.
“We love our digital dot com experience, but it’s two-dimensional. It’s a bit flat,” Wollner said. “We try to manage it through chatbots and various forms of automation that extend that experience, but ultimately it’s limited.”
JPMorgan launched its Decentraland lounge several months before Quontic opened its space, a move Quontic saw as bolstering its own efforts to establish a presence in the virtual world, Wollner said.
But Quantum sees the big bank’s approach to the metaverse as an example of what to avoid, Wollner added.
JPMorgan’s Onyx Lounge, named after its Ethereum-based services platform, features a roaming tiger, a spiral staircase, and a portrait of CEO Jamie Dimon.
“We saw it as very self-promotional,” Wollner said, referring to Dimon’s portrayal and the space’s promotion of his new line of crypto businesses. “It’s very much about JPMorgan, not their client. … We’ve doubled down on the notion of, ‘If we’re going to do this, let’s do it for our customers. And let’s build it for them. And that’s the approach we’ve taken.
Wollner said the bank is taking an educational approach with the space, inviting customers to visit, learn more about Decentraland, crypto wallets, and how tradable digital assets work.
“With the click of a button on our metaverse landing page. You can jump in and voila, you’re living the Quontic metaverse,” Wollner said.
But when it comes to operating the space as a full-service branch, that’s where Quontic takes a “wait and see” approach, Wollner said.
The idea of using the metaverse as an extension of a financial institution’s banking presence raises several regulatory and security issues that have yet to be resolved, Wollner said.
“We are a heavily regulated financial institution and we take compliance and risk very seriously,” Wollner said. “Prior to conducting banking business in our Decentraland outpost, we will ensure that security and compliance regulations and rest are all taken care of, and that is yet to be determined.”
It’s only a matter of time before regulators focus on the metaverse, Vishnu said, with regulators likely to focus on the building blocks of financial regulation, such as identity management, knowledge of your customers’ transactions and the fight against money laundering in the virtual world. .
“Regulation is going to be a concern for banks, but in my opinion, probably not yet,” Vishnu said.
Using avatars to navigate the metaverse also comes with its own set of security and identity challenges, Vishnu said.
“One of the biggest considerations that would happen in the metaverse is the whole identity management part of security,” Vishnu said. “Do you know who you are really dealing with? This connection with the real people, with the real identity is going to be important.
While a virtual world presents a new form of customer interaction that banks need to consider, banks should approach identity verification in the metaverse the same way they do on their digital and mobile channels. said Vishnu.
“It could be a new form of interaction, but the considerations are going to be similar,” Vishnu said.
Does this make sense for banks?
Alongside JPMorgan Chase and Quontic, other financial institutions are planting their own flags on the terrain of the virtual metaverse.
In March, London-based HSBC bought land in The Sandbox, a virtual world used primarily for games.
HSBC said the space will be used to engage and connect with sports, esports and gaming fans.
“The Metaverse is how people will experience Web3, the next generation of the internet,” Suresh Balaji, marketing director, Asia-Pacific, HSBC said in a statement.
But investing in the metaverse may not be the right decision for all financial institutions. Banks need to consider their target demographic when determining how involved they want to be in the space, Vishnu said.
For a bank with an older, less tech-savvy customer base, the Metaverse might not have much to offer its customers, Vishnu said.
“If you don’t have the customer base to serve in this interaction model, are you now going to pivot and try to attract a new set of customers? I think it should be closely linked to the bank’s overall strategy and not unique,” Vishnu said.
In addition to the public metaverse, banks need to be aware of the internal use cases of a virtual world, said Michael Moerman, partner at Capco.
“There are publicly available metaverses where anyone can participate. But banks will have the potential to own their internal metaverses, which could be corporate, private, just for their employees.
For example, Bank of America launched a virtual reality training program for its employees last year. The training, which is offered in nearly 4,300 of the bank’s financial centers nationwide, creates an environment in which Bank of America employees can work on their interactions with customers.
A private metaverse could also be used by banks for customer interactions, such as offering wealth advice in a virtual private space, Moerman said.
French lender BNP Paribas launched its own virtual reality app in 2017 that allows retail customers to access their account activity and transaction records in a virtual reality environment.
In addition to creating a virtual space, banks should see the metaverse as an opportunity to expand their existing services, such as enabling transactions and providing advisory services to customers interested in investing in the metaverse, in the new world, said Vishnu.
PNC and Morgan Stanley already provide advisory services to clients interested in investing in the metaverse in the form of buying virtual land, Vishnu said.
“Whether it’s selling NFTs or selling smart contracts, there are a lot of different things that are going to start happening here,” Vishnu said. “We are only at the very beginning of a new world.”