3/23/22, 3:54 PM 4 ways banks are experimenting in the metaverse | American Banker

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4 ways banks are experimenting in the metaverse

By Penny Crosman March 21, 2022 1:23 PM

An attendee of Mobile World Congress in Barcelona tries out an Oculus headset to navigate a
virtual world. Source: Bloomberg News

A handful of banks are setting up shop in the metaverse in an effort to learn more about it and
to reach the young gamers that use it.

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The so-called “metaverse” is really multiple separate virtual reality environments, including
Decentraland, The Sandbox and Somnium Space. Some primarily host video games. Others, like
Decentraland, are online worlds where people create avatars that represent themselves and
Followparticipate in real-life activities like buying a house and attending a wedding. Second Life, the
Us In Real Time

virtual world Linden Lab developed in the early 2000s, was one of the first of these. At that
time, a few banks set up branches there, to help customers manage their money while in the
environment.

This time around, banks are setting up lobbies, games and methods of letting users buy and sell
game tokens and turn them into cash.

“Currently we have a land grab by some banks experimenting with the metaverse, but this is no
different from the virtual branches we saw pop up during the Second Life days, so nothing new
in that respect,” said Brett King, futurist, Moven founder and Breaking Banks radio show host.

“The core of the metaverse isn’t virtual real estate but digital worlds with digital assets,
environments, businesses and activities.”

A presence in the metaverse could help banks attract young customers and possibly create new
products and business models.

“I think it's potentially a massive growth opportunity for financial services players,” said Lucia
Uribe, an Oliver Wyman partner who specializes in financial services. “We're at the very early
stage of an emerging market that could have quite significant growth over the coming years.”

Uribe also co-led a global consumer study by the Oliver Wyman Forum, a think tank of the
consulting firm, that identified metaverse user trends. The research found that metaverse users
skew younger, urban and male.

“If you have an end consumer who's gaming or exploring the metaverse, they come across you
there and it reinforces that brand relationship,” Uribe said. Banks could also do product
education, internal training or internal events in the metaverse, she noted.

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Banks could build bridges between the online and offline worlds. Zelf, a U.S.-based challenger
bank, is already working on this.

Follow“Looking
Us In Realforward,
Time there will be increased convergence between the online and offline worlds
and development of virtual to physical payments and financing, potentially the emergence of
new ownership and asset classes, as you think about things like real estate in the metaverse
that potentially point toward new types of credits,” Uribe said. “You could envision virtual
mortgages on metaverse real estate or rental agreements.”

Early adopter banks are simply learning and connecting to others in virtual spaces.

“It's really for the purpose of mitigating the risk of being left behind,” Uribe said.

Scroll through to learn about projects banks are pursuing in the metaverse.

A visit to the J.P. Morgan lounge in Decentraland.

1 JPMorgan Chase puts Jamie Dimon and a tiger in a

virtual room
The $2.6 trillion-asset New York bank has set up shop in Decentraland, a virtual world in which
users can buy digital plots of land. According to Yahoo Finance, Decentraland has a monthly
active user base of about 300,000 people and 18,000 daily users. It’s run by the Decentraland
Foundation.
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When your avatar walks into the Onyx by J.P. Morgan lounge in Decentraland, you find yourself
in a room with an illuminated portrait of Jamie Dimon, a pacing tiger, and a couple of wall-
mounted displays. Clicking on one of the displays starts a video “demo” of how payments could
be made
Follow in space
Us In Real Time using smart contracts. Another shows a timeline of the bank’s blockchain
projects.

The virtual lounge was created by the same J.P. Morgan Payments team that put out a
whitepaper last month about business opportunities in the metaverse. The virtual lounge and
the paper are intended to help start conversations with clients. The tiger is a nod to 2022 being
the Chinese Year of the Tiger.

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HSBC hopes to reach esports enthusiasts in The Sandbox.

2 HSBC buys land in The Sandbox

In mid-March, Animoca Brands, the Hong Kong-based developer of the gaming environment
The Sandbox, said that London-based HSBC, which has $3 trillion of assets, will acquire a plot
of virtual land in its environment. Companies typically use land in The Sandbox to host games
and contests. The Sandbox has been downloaded 40 million times and has 1.2 million active
monthly users, according to the company.

HSBC will use its plot to connect with sports, esports and gaming enthusiasts.

“The metaverse is how people will experience Web3, the next generation of the internet —
using immersive technologies like augmented reality, virtual reality and extended reality,” said
Suresh Balaji, chief marketing officer for Asia-Pacific at HSBC. “At HSBC, we see great potential
to create new experiences through emerging platforms.”

The bank will work with sports partners, brand ambassadors, and Animoca Brands to co-create
experiences that are educational, inclusive and accessible, he said.

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American Express hasn't revealed plans for the metaverse, but has filed for several related
patents. Chona Kasinger/Bloomberg

3 American Express files patents hinting at future

metaverse plans
In early March, American Express filed seven trademark applications related to NFTs and the
metaverse with the U.S. Patent Office.

One is for e-commerce software that lets consumers perform electronic business transactions
in the metaverse. Another is for the “provision of an online marketplace for buyers and sellers
of digital media, namely, non-fungible tokens.” A third is for assistance with electronic transfers
of money and banking services in the metaverse.

“Amex is always monitoring emerging technologies to see how they could benefit our
customers, and the metaverse is a space we’re following,” a spokeswoman said. “We have no
plans to share at this time but are watching as this space evolves.”

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Zelf is building an embedded banking system for exchanging value from virtual worlds to the real
world, according to founder Elliot Goykhman. Chalabov Konstantin

4 Zelf builds a bridge from banking to gaming

The way Elliot Goykhman, founder and CEO of the Delaware-based challenger bank Zelf, sees
it, the coronavirus pandemic got more people interested in virtual worlds as an escape from
seclusion.

And they began spending more money in the metaverse.

“The story of 2021 is that people started to spend oftentimes more on the outfits and skins of
their virtual characters than on their real-life selves,” Goykhman said. “I know very few people
who would spend $4,000 on a pair of sneakers, but people do so in the metaverse.”

Zelf is building an embedded banking system for exchanging value from virtual worlds to the
real world in conjunction with a bank account. It already offers embedded banking in
messenger apps.

In a typical scenario, a 17-year-old boy might have $2,000 in tokens inside a video game, but
needs $50 in real-world dollars for a date with his girlfriend. Zelf would hold the game tokens in
escrow and provide the player with a payday loan. If the person couldn’t repay, Zelf would sell
the game tokens on its marketplace to other players to compensate for the loss.

Penny Crosman Executive Editor, Technology At American Banker And Arizent, American Banker

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