Banking on the metaverse: What HSBC and JPMorgan’s move into the metaverse tells us

By Danny Stefanic, CEO and founder of MootUp

There hasn’t been an industry untouched by metaverse innovation over the last six months. The news agenda has been rife with stories of sectors and global organizations embracing and trialling virtual reality experiences to keep up with projected metaverse user demand. So, when HSBC announced its foray into the virtual world last month with the purchase of virtual real estate, it wasn’t an entirely unexpected move by the banking giant.

In a statement, the bank said it was hoping to leverage its metaverse land to interact with sports, e-sports and gaming enthusiasts. This announcement was closely followed by a second, in which HSBC publicly launched a metaverse investment funding for its high-net-worth clients in Asia.

HSBC’s investment into the metaverse is just one example of how the financial services sector is expanding into the virtual, 3D realm. It also effectively demonstrates that the metaverse is not a hype but a trend that big corporates are expecting will completely revolutionize banking and investment.

As someone who has created metaverse products for over two decades, I have witnessed first-hand how this technology can and will transform businesses. Importantly, the financial services sector is primed for metaverse innovation. I explain why this is the case below.

What is the metaverse?

Put simply, the metaverse refers to shared online 3D worlds accessed via computer, smart devices, augmented reality and virtual reality headsets. Interaction and engagement are core to the principles of metaverse, ensuring that users are able to become fully immersed in online environments facilitated by metaverse technology. Think of it as adding a real-time, inhabited, third dimension to a static, two-dimensional webpage.

Despite the most recent developments and hype, the metaverse is by no means a new concept. It has been around for over two decades, with innovative companies exploring how technology can be used to practically implement metaverse experiences. While there has been plenty of discussion about the metaverse from a consumer and entertainment perspective, the reality is that the true potential of the metaverse comes with its application within enterprise.

Banking in the metaverse

Financial institutions’ transition into the metaverse was only a matter of time given the growth of cryptocurrencies and NFTs. The widespread adoption of these assets – figures now estimate there are 300 million crypto users worldwide, for example – have allowed for organizations to do business and transact securely in the metaverse. Cryptoassets and VRs growth in tandem have made it easier for users to experience a truly virtual reality that mimics or even exceeds physical reality.

HSBC’s move into the metaverse was not the first for the banking industry, however. In February, JP Morgan became the first bank to enter the metaverse, opening a lounge which would allow businesses and other institutions to join the virtual world.

HSBC and JP Morgan’s investment in virtual reality signals a clear shift for the banking industry –a sector that has traditionally been slow to adopt new technologies.

So, what opportunities does the metaverse hold for banking?

Figures from Gartner estimate that 25% of people will spend at least one hour a day in the metaverse by 2026 for shopping, work, education, social and entertainment. Meanwhile, data from JPMorgan shows that $54bn is spent on virtual goods every year.

From a customer perspective, the metaverse could completely alter the way we engage with our banks. The closure of physical high street branches could be replaced by virtual ones, and the time traditionally spent visiting banks to open current accounts and applying for mortgages could be altered altogether if those actions can be done in a virtual branch.

Similarly, traditional banks’ adoption of the metaverse will allow financial institutions to engage with a new tech-savvy generation who are eagerly embracing NFTs and cryptoassets. Providing capabilities for customers to lend or insure against digital assets or provide mortgage or credit agreement for the purchase of virtual real estate, could also revolutionize banking in the metaverse.

But the benefits of virtual realities span far wider than keeping up with customer demand. Investing in virtual real estate could have a significant impact on a bank’s bottom line, as virtual real estate sales continue to skyrocket.

Similarly, the rise of metaverse for business could completely alter how global banks like HSBC operate internally. The metaverse for business refers to the creation and launch of 3D environments for companies. This can range from a virtual office space for employees to work from and engage, through to locations for training and engaging with clients and customers. Digital twin technology, or the creation of digital replicas of existing physical spaces, has immense potential here.

Metaverse for business, or enterprise metaverse, opens up a completely new way of working for banks and financial institutions – allowing staff members to engage and collaborate in ways not seen before.

HSBC and JPMorgan’s support for the metaverse will likely be the start of a paradigm shift for digital banking, and it won’t be long until other global banks follow in their footsteps announcing their move into virtual reality. We are witnessing the very beginning of an entirely new way of banking.