Indian Banks in the Metaverse can lend against virtual currencies and real estate. The Metaverse may reshape the future of banking but is still far from reality.
What exactly is the Metaverse?
The metaverse has been conceived as an online, fictional universe akin to the real world. Any online game or platform where players can create avatars, explore the virtual world and interact with each other can be considered as a metaverse world. Examples of this include the popular games Fortnite and World of Warcraft, the world-building games Minecraft and Roblox, and even multi-player worlds like Disney’s Club Penguin.
In 2019, the company Facebook (later renamed Meta) unveiled a virtual world called ‘Facebook Horizons’, where users of the social platform could create avatars and interact with each other using augmented reality (AR) and virtual reality (VR) technology. Using AR and VR, users could use real-life motions to do actions in the virtual world, e.g., make their avatar walk, dance, interact with objects or other users, and much more. The platform was later rebranded as Horizon Worlds, and Meta stated in 2021 that it was dedicated to expanding the Metaverse and making actions such as hanging out with friends, shopping, banking, and other services available as an alternative to the real world.
What does the Metaverse aim to achieve?
Though many strides are yet to be taken to how we can use the Metaverse in our daily lives, many users have begun to use it as an escape from reality into another. The Metaverse currently exists of several ‘worlds’ that users can explore, such as the Ethereum blockchain-based Decantraland, the VR game The Star Atlas (ATLAS), the HyperVerse, and Sandbox, where people can buy and sell plots of land similar to trading cryptocurrency and NFTs.
The day is not far when banks in metaverse can lend against these properties and make interest income.
Many companies have also bought land or spaces in these virtual worlds to establish their digital presence and expand their online services in the future. Many companies and services have set up shop in the Metaverse, with many banks hopping on the wagon as well.
As the virtual reality market develops, it creates opportunities for banks in the Metaverse to lend and make business sense for bankers.
Which are the Indian Banks in Metaverse?
People in the Metaverse can earn ‘tokens’, which they can use to avail services or cash out for real-world money. This opens the doors for banks to establish their presence and offer ways for users to store or exchange their virtual money. They also aim to create virtual branches in the Metaverse, through which people can utilize banking services from the comfort of their own homes.
The very first bank from all banks in metaverse to set up a space was J P Morgan, which opened its virtual lounge ‘Onyx’ in Decantraland in February of this year. Though the bank doesn’t seem to offer any services at the moment, users can explore the two-story lounge with their avatars, which displays the bank’s accomplishments in the field of cryptocurrency and videos and presentations from previous events.
By establishing its presence in the Metaverse, the bank is confident that it will be able to help facilitate transactions in the Metaverse and create earnings through virtual transactions. Rather than just sending money online and acting as a virtual branch, these virtual banks will also help educate users on how to invest in NFTs and cryptocurrency.
With the advent of buying and selling virtual spaces in the Sandbox and Decantraland (similar to how the bank ‘rented’ its own space), virtual real estate may very well become a thing. The price of one ‘parcel’ of virtual land doubled from $6000 to $12000 in just six months- spelling a very profitable future for virtual land owners. If the world of virtual real estate continues to grow in this manner, then users will benefit from a bank that caters to its mortgage, credit, and loan needs tailor-made to the metaverse.
With the growth of the virtual world, we very well may see the dawn of a complete and working virtual country or economy in the future. If Meta’s vision is to be believed in, then people may shift to virtual jobs, virtual shopping, movies, entertainment, and much more, which will help generate revenue in the virtual space. J P Morgan has expressed that it is very interested in lending its expert banking services and bridging the financial gap between the real world and the Metaverse.
Following the bank’s lead, many other banks have also begun to make their presence known in the Metaverse. The Hong Kong and Shanghai Banking Corporation (HSBC) has also bought land in the Sandbox, which it intends to use to cater to the needs of e-sports competitors and gamers. American Express has also stated that it has begun operations to create services in the Metaverse. In contrast, other banks like the South-Korea-based Kookmin bank have already started offering services to users, such as one-on-one consultancy in the virtual space.
Indian Banks in Metaverse
Many Indian banks have also thrown their hat in the Metaverse ring and are planning to develop their own virtual branches and initiatives to attract customers. The RBI announced that it is working with ICICI bank, SBI, and HDFC bank to integrate blockchain-based technologies into the everyday banking experience. Many other banks have been working to incorporate cryptocurrency into their systems in safe and secure ways to keep up with the virtual currency trend and provide their customers with more accessible ways to make transactions, avail loans, and much more.
Are there any risks?
Virtual bank branches plan to run on blockchains known for their security and privacy. However, many money launderers and financial criminals have been using these very blockchains to make anonymous transactions that are hard to track. With banks operating entirely online, the risk of data leaks, hacking and virtual theft substantially increases. Unless banks put proper controls in place to make sure their users are legitimate people making licit transactions and that the funds they are entrusted with are completely safe, it may be more logical to stick with real-world banks.
Conclusion
With the growth of the Metaverse, many companies are scrambling to make their mark in the virtual world and attract customers. Though banks have also been caught in the Metaverse frenzy, there are long-term advantages for them in making their virtual presence known. Suppose it continues to grow as predicted, In that case, many real-world functions may be replicated online, which requires financial regulators to help people make sound financial decisions- even in the Metaverse. J P Morgan was the first bank to create a virtual space and announce its intentions to broaden its operations in the Metaverse, with many banks following their lead.