We live in the digital age. Fintech is the buzzword in recent times. Today, people can use their smartphones and access banking services. Likewise, the metaverse has grown by leaps and bounds. Let us explore how the Web 3.0 era will shape the future of financial services.
Banking in the metaverse
Customers need not make physical visits to bank branches. Instead, they can use digital avatars on their smartphones and laptops and interact with their relationship managers/ robo-advisors. Haptic headsets will make it look similar to real-world dealings.
Financial institutions can provide the best services with a user-friendly experience through data visualization and gamification. Extensive testing in virtual reality and mixed reality environments enables cross-functionality. Users can avail of services like wealth management, portfolio analysis, funds transfer, recurring deposits, bill payments, loans etc. The ultimate goal would be to promote open finance by integrating Central Bank Digital Currency (CBDC) and NFTs.
Investment banks are opening virtual lounges in the metaverse. They are offering services like foreign exchange, cross-border payments, insurance, trading, and asset management. Financial service providers can keep a close watch on account validation, inflow and outflow of funds, and fraud prevention. Integrating blockchain technology will provide advantages like seamless exchange of information and instant processing of payments.
Payment service providers are launching digital showrooms to stay ahead of the curve. Customers can make payments in a hassle-free manner to merchants in the virtual world. Retailers can use white-label storefronts for demonstrating their products. Buyers can view the available goods for sale, process transactions, and check out swiftly.
VR Branch Testbed
Virtual Reality (VR) continues to make inroads into the financial services industry. Customers can wear head-mounted devices and access banking services. Financial institutions can open VIP lounges for important clients. These High-Net-Worth-Individuals (HNWIs) will initiate remittances, analyze their portfolios, avail of one-on-one consultations, and make new investments.
Online trading apps are also using VR. Investors will receive real-time updates about stock prices and key indices. Later, they can buy or sell securities based on the market conditions. Retail and institutional traders can move the live feed around, analyze the performance of specific stocks, and make the right financial decision.
Banks and payment service providers (PSPs) can offer personalized services to their customers. Augmented Reality (AR) devices helps in processing transactions, sharing information about nearby ATMs, automatically responding to customer queries, data analytics, and digital trading. Computer-generated information blends onto the user’s environment and boosts financial awareness.
Buyers can also shop for products by using their virtual credit cards. Smart glasses will layer simulated information over physical goods. Generally, objects appear as markers. Customers can verify the quality of the goods, check the price, and execute transactions. Thus, Augmented Reality offers flexibility, enables a contactless shopping experience, and users can perform banking operations with natural gestures.
Decentralized Finance (DeFi)
Investors have locked a whopping $38.51 billion in Decentralized Finance platforms as per DeFi Pulse. Investors are benefiting from services like P2P lending, trading of derivatives, asset management, crypto payments, insurance, and staking.
Financial service providers can use blockchain technology to eliminate intermediaries, enhance liquidity, and remove counterparty risk. It enables inclusiveness by operating in a trustless manner. Hence, users can earn, spend, borrow, lend, and invest in digital assets without depending on middlemen and centrally governed entities.
While cryptocurrencies are highly volatile, stablecoins are a viable alternative for investors. Digital assets like USD Coin (USDC), Dai (DAI), and Tether (USDT) maintain a 1:1 ratio with fiat currencies like the US Dollar (USD). Stablecoins backed with adequate reserves can be used as remittances. Payments can be made transparently without incurring high fees.
Stablecoins are of different types, Commodity-backed, Fiat-collateralized, Algorithmic, and Crypto-backed. They are also immune to economic crises and investors can use them as a safe haven. Escrow helps in automatic payments without any institutional involvement. Hence, stable coins act as a store of value, balance the pros and cons of fiat and cryptocurrencies, and can be used in a borderless manner.
Metaverse will play a critical role in modernizing the financial services industry. Some of the trends will be Tap-to-Pay, Bitcoin rewards programs, Limited-Edition NFT giveaways, Crypto Loans without collateral, Voice Payments, and Virtual Cards enabling contactless transactions. Want to make giant strides? Tap the potential of the metaverse and be the pioneer in the evolution of fintech.