Metaverse Set To Show The Way For Banks In Asia

The metaverse is going to be the biggest disruption to how we live and financial firms are looking at it as the next pot of gold.

There are many takers for metaverse, created by the combination of virtual reality, augmented reality and the internet, and Asian banks are catching up with their western counterparts so that they do not miss the bus.

Asian banks have already started capitalizing on the growth potential of the metaverse, which is expected to become the next iteration of the internet.

HSBC has started an exclusive fund focused on the metaverse for its clients in Hong Kong and Singapore, putting thrust on the five segments of the virtual ecosystem - infrastructure, computing, virtualization, experience and discovery, and interface.

The bank has already made its presence felt in the metaverse with a plot of digital land called 'The Sandbox' to use for sports, e-sports and gaming.

HSBC is planning to position itself as the apex bank for high net worth clients in Asia and has pumped $3.5 billion into its wealth and personal banking business.

Standard Chartered Bank Hong Kong (SCBHK), Chartered Group's innovation, fintech investment and ventures arm, too, has bought virtual land at The Sandbox metaverse's Mega-City district, a culture hub inspired by Hong Kong talents, to explore co-creation opportunities in this new and exciting space.

With an investment running over 1 billion Singapore dollars ($722 million), Singapore-based DBS Bank expects its tech segment to grow by an average of 1,000 employees per annum in the next couple of years.

India-based Union Bank of India has launched its metaverse virtual lounge which allows customers to opt for a digital avatar to enter the bank lounge to access the available banking services.

Banks in South Korea have also started virtualization of their branches in the metaverse.

The metaverse foray in the U.S. was spearheaded by JPMorgan Chase in February after the biggest U.S. bank by assets opened a virtual lounge named Onyx lounge.

The metaverse will allow financial institutions and fintech firms to use cutting-edge technology with a human touch to boost personalized customer interaction. Thus, it will restore the dialogues lost on digital channels.

According to a report by Citi bank, the total addressable market for the metaverse economy, represented by immersion technology, emergent delivery technology and digital asset technology, is expected to reach $13 trillion by 2030.

There are a whole bunch of technical risks associated with metaverse banking, which revolves around financial interoperability between one or more digital worlds and the physical world, like worries associated with money laundering and criminal activities on the metaverse.

Another abstract risk has to do with how digital reality interacts with physical reality, which is subject to the rule of law of the physical world. Thus, more legal remedies have to be put in place around metaverse banking, addressing the regulatory grey issues of the metaverse because metaverse assets are not governed by property law, but rather by contract law.

The third one is something to do with social risks, like in online gaming called griefing, a strategy in an online game that makes other players' lives as miserable as possible. The metaverse banking has to come out with a strategy that leaves less room for griefing and has to ensure as protection from griefing as possible.

Fourthly, there may be people who find more value in digital life than in physical life. Because of value perception, those people make a conscious life choice to live in the digital world. This brings with it unintended consequences associated with economic productivity and birth rates.

Metaverse banking comes with its own set of ecological impacts due to its reliance on Virtual Reality (VR) technology and data centers, which need a tremendous amount of energy to become operational and can cause a high environmental cost.

Besides, metaverse banking will also need high-resolution pictures, which will push energy usage even further.

Since metaverse banking will have to collect a lot of personal data, including eye-tacking, physical reactions, and haptics, the question is how to protect that data.

There have to be many legal and social remedies in place along with technological innovations before metaverse banking can mature into what it promises to be.