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The metaverse is real: Here’s how it will affect your community bank

Mar 28, 2022

It’s no secret that community banks can use a facelift when it comes to creating positive customer service experiences like increasing customer engagement.

How do we know? Recent research shows that 55% of banking customers feel unseen and 48% feel undervalued. Customers have also said that their experiences with financial brands rarely met their expectations.

However a recent survey of community banks shows a different trend. While larger banks are either closing branches or consolidating, community banks are continuing to thrive.

  • 77% of survey respondents said they added wealth advisory services in the last 3 years
  • 29% of survey participants expect to add cryptocurrency services
  • Digital engagement has become a key strategy to help keep their doors open

Perhaps the metaverse can be looked upon as a gateway for community banks and credit unions to improve the customer experience. Is it possible for smaller banks to rethink their approach to customer service through engagement in the metaverse? Or is the metaverse just another technological distraction?

Before going into examples of how the metaverse can potentially improve the customer experience for community banks, let’s give a basic understanding of what the metaverse is.

Metaverse 101

The metaverse is a digital world where connected, interactive and virtual experiences simulate experiences in physical world.

In this virtual space, physical and digital lives come together to create a virtual experience where people can work, build businesses, socialize and more.

Rather than one large virtual world, the metaverse is a collection of many worlds that are being created as companies and individuals interact digitally to create relationships that build the fabric of this online user-generated ecosystem.

One of the most exciting — and appealing — things about the metaverse is the opportunity to democratize access to goods, services and experiences within the financial services industry.

As businesses across the world continue to transform operations, financial institutions continue to witness a growing interest and participation in blockchain, digital assets and non-fungible tokens (NFTs), the foundation upon which the metaverse was built.

As the metaverse evolves into an ecosystem filled with gateways, platforms, service providers and more, it’s time for community banks and credit unions to brainstorm how they can include the metaverse in their plans to reimagine the customer service experience for the future.

What’s now: financial institutions in the metaverse

What do financial institutions do in the metaverse from a practical standpoint?

JPMorgan became the world’s first bank to build a presence in the metaverse when it opened Onyx Lounge in the blockchain-based world, Decentraland.

What exactly is going on in the lounge? At the moment, not much.

However, users can walk in and watch experts talk about the crypto market. As the platform expands, there is potential to create a fully functioning virtual contact center where users can talk with customer service representatives and perhaps even create a space where the bank can help its customers to grow their financial literacy.

Companies outside banking are blazing the trail faster with customer service experiences. TerraZero, for example, is a provider of virtual real estate solutions targeted toward entrepreneurial-minded people seeking funding to begin their journey in the metaverse.

But TerraZero does more than just mortgages. They also sell prefabricated virtual buildings that can serve as a space to host live streaming events or reveal the next NFT. Think concerts, artist gallery events, educational gaming adventures — all of which can be used as a pathway to attract younger audiences to become more engaged with community banks and credit unions.

Another company sees the metaverse as an opportunity to give access to wealth-building opportunities to all, regardless of income level or where they live.

Lynx, a financial technology solutions company, has announced its strategic plan to experiment with how it can use the metaverse as a way to better connect with its customer base located mostly in southeast Asia. The company serves large-scale merchants, financial institutions and other B2B partners that use the Lynx digital payment platform.

The company is evaluating two use cases that will serve as their first product offering in the metaverse: P2E and global remittance.

P2E, or Play 2 Earn, are crypto-based games to create and earn valuable digital items that can be sold to generate income. P2E gained popularity during the early days of the pandemic as people transitioned from their normal jobs to become NFT gamers, becoming virtual factory workers, in a sense, to build new assets in the digital economy.

Lynx intends to build a payment layer into the platform that turns NFT gaming earnings into real money that can be used for daily living. Users will be able to turn their NFT token earnings into cash or move the funds onto a Lynx prepaid card that can be used to buy food, pay bills and more.

Global remittances, or money transfers that occur between low- and middle-income countries, were estimated to be around $589 billion dollars in 2021. Lynx intends to reimagine the entire global remittance experience by creating a product that uses digital meeting spaces that allow the person sending money to visit with and communicate with customer service representatives while transferring funds.

Where do you begin?

Given the metaverse’s unpredictable growth, why should community banks and credit unions take the risk to invest in the metaverse at all?

Because it can position you as an innovative leader, open the door to capturing new customers and expand services.

JPMorgan's Onyx Lounge is an example of a deep dive into building an actual presence in the metaverse. And while the verdict is still out on how it will affect customer service, it’s an opportunity for smaller banks to begin to think about how they can take a step into the metaverse in the future.

TerraZero’s metaverse mortgage program is a way to attract more millennial and Gen-Z customers who are looking to partner with companies that speak their language.

Global fintech solutions company, Lynx, demonstrates that although they aren’t ready to move forward with concrete plans to engage in the metaverse, they are at least starting to think in practical terms about how to align their most popular services with the metaverse for a customer base that is largely forgotten in most traditional banking institutions.

As JPMorgan stated in their recent white paper, the metaverse is not yet stable enough to create a long-term strategic plan for most financial institutions. However, there is a benefit to those companies that choose to be first in an ecosystem where they get to create their own intellectual property, develop future business models and build relationships with other partners while the competition is still low.

How Wipfli can help

With Wipfli’s combined digital and financial institutions teams, you can get guidance and solutions that will help you be more competitive and remain secure. Reach out to us for more information on our financial institutions services web page.

Author(s)

Zak Dabbas
Principal
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