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Why should bankers pay attention to the metaverse?

Surabhi Gawde
14 Oct 2022

The answer to the question is …. because people don’t wake up in the morning and think about interacting with their bank accounts. Instead, they look forward to new experiences, fun things to do during leisure hours, and socializing in both new and traditional ways.

Blog originally published in February 2022.

Moreover, the way in which people experience and consume is increasingly linked to projecting a social status, and so it is not private whether it is branded clothing or a new car or a vacation; the experience is shared or signaled to a broader community or group. And with the advent of Web3, these experiences will be increasingly digital, and will gain the characteristics of collectibles (objects or memories acquired by having spent time or money on something).

Take for example Nike, Clinique, Dior, Gucci, Samsung, Walmart, Australian Open – every sector that closely interacts with consumers is moving into NFTs (non-fungible tokens) and metaverse experiences to engage consumers. For banks and fintechs, this improvement presents a challenge. A top priority for them is to keep their customers engaged, and to be their primary financial services provider; but should the metaverse be part of that solution? Some banks are taking exploratory steps – such as J P Morgan with their launch in February 2022 of a “lounge” in Decentraland – to somewhat mixed reviews. And some banks are holding back. Let’s explore why.

Gaming and Investments are interlinked ?  

Let’s take a step back. The closest and most commonly held vision of the metaverse has been gaming. Gaming is strongly linked to investments[i];  and the book Thinking in Bets[ii] , explains how poker is closer to real life than chess,  with research-backed information and actual experiences.

Banking has many parallels with gaming, and vice versa – the ability to earn assets, rewards, and money is similar to consumer goals in financial services. But very few enterprises have been able to tap into this sector, relying on their own gaming devices and content. Microsoft’s steady acquisition of gaming studios, from the Bungie acquisition for the Xbox Halo launch 20 years ago to Activision in 2022, has been a definite winner long-term as part of its enterprise strategy, whereas Google Stadia and Apple have failed, despite having the best resources. Microsoft’s entry into the metaverse makes new products possible with enterprise grade compliance, regulation, and scale. One may or may not like avatars as they are unlikely to depict real appearance, but NVIDIA’s keynote speech had a figurine version of the CEO as a visual cue, and it was not alarmingly hyper-realistic or a floating half body.

If games have been around for some time; what’s changed now?

The cross-pollination of technologies – that is the game changer, allowing for the creation of digital tokenized assets, of exchangeable (i.e. real-world) value and, importantly, with individual agency. Community ownership and incentive models have also reduced the time to create digital economies.

The metaverse, seen from one angle, may seem like a gamer’s paradise, with an ecosystem of thousands of players. GameFi, referring to play-to-earn blockchain games, or better yet, games that incorporate a “play-and-earn” framework, allow participants to earn digital (and therefore exchangeable) assets for their in-game efforts. These accrued and tradable assets live on a distributed network, independent of any single organization and outside the current banking structure.

Earning currency from games isn’t new, but instead of rewarding players with in-game currencies confined to that game, play-to-earn games distribute fungible token rewards that are swappable for other crypto tokens or fiat[iii] currencies. The traditional way to make money was “work to earn,” but the future of income is “x to earn” – play to earn, learn to earn, create to earn, and work to earn.

Bloomberg expects the metaverse to grow to be an $800 billion market, because there’s intrinsic value in it. We will come to a point when your digital presence is worth the same, or more, than your physical one – where the metaverse is not just a game in a virtual world but is a world where you are not limited by physical constraints, and which can extend into real life.

So how can banking entities participate and even ride the wave?


With these changes in how we interact with everyday brands – whether product or service – the financial services sector needs to understand how it can take its place in this new environment and ensure that it earns its share of the metaverse pie.

  1. The new market: The metaverse and Web3 together open up a new market and new asset classes. New digital art, old collectibles digitized, or new collections – the possibilities are endless. Blockchain and a host of metaverse technologies bring in new ways of interacting, buying, holding, owning, and selling digital items and assets. Further, a trusted ledger is coded in technology using blockchain and other distributed technologies. In simple words, trademarking and notarizing are incorporated in the technology as NFTs. Additionally, they are interoperable with third-generation distributed ledgers.

    Decentralization and ownership digitize creations and create new assets with marketplaces for buyers and sellers to exchange valuable items. New business models and platform collaborations are powered with digital asset wallets, digital custodian services, and equally modular product engines. These can coexist with the existing Web2 stacks, compelling banks to be ambidextrous in both Web2 and Web3.

  2. Data sharing across platforms: If data has been the new “oil”, verifiable data (NFTs) is the next frontier to contain and monetize the “oil”. Technologies for computing on encrypted data and APIs enable faster data aggregation. Zero-knowledge proof tools allow for validation of data without exposing it. Combining off-chain data and on-chain data provides better credit scores, more granular details for consumer personas, a more complete view of digital and physical net worth, and other benefits. New products-as-a-service can be offered with aggregated data platforms. Novel forms of governance lie in the decentralized nature of multiple worlds in the metaverse.

  3. Infrastructure and connectivity: Open environments are somewhat akin to open banking. Open standards, cross-chain NFTs, and cross-virtual-world avatars are emerging. Transactions on new age distributed ledgers are multiple times faster than current financial transactions, at zero fees and with near-zero operating costs – food for thought as traditional banking fees have not evolved in over 150 years. Decentralized finance is shaping new ways of financing.

    Further, meshing up of underlying speed is 5G. The technology is 13x faster than 4G, and Wi-Fi 6 is 3x more powerful than 802.11. 5G-enabled financial data aggregation can transform how financial institutions serve both consumers and commercial banking clients. Although the current altimeter issues at airports simmer, new technologies need new devices and new ways to ensure privacy and data security. With 40 countries or territories having 5G and many more expected to roll it out in the next one to three years, how we interact will change for the better. 5G Spectrum auctions and allotment have been underway in several territories around the world. Currently, 90+ countries are exploring digital currencies, at varied maturity levels and connectivity for exchange of value, tokens, etc. within metaverse worlds and amongst the digital currencies will depend on strong underlying connectivity.

  1. Evolving nature of decentralized futures: From smart contracts and gated NFT communities, to DeFi, DAOs, and private 5G networks, vast interconnected topics in themselves, paper guarantees will move towards cryptographic guarantees as they are deterministic and have definitive truth[iv]. From Enron to Wirecard, we have seen that paper guarantees and audits can fail because they lack a true sense of shared truth. With cryptography, truth doesn’t change, nor does it have to be proven later; it is encoded in the system. In DeFi, yield farming is the process where one earns either fixed or variable interest by lending digital asset tokens to the network and the counterparty risk is encoded in a smart contract. As of early August 2021, the total value locked in DeFi protocols was around $80 billion, according to DeFi Pulse.

Finally, overlapping, siloed, and fragmented regulations in various countries and continents are inefficient. Web3 aims to apply definitive truth and deterministic systems to banking and insurance, and to permeate through every walk of life.

We already have banking over the internet, so why use clunky VR sets?

In 1990, it was difficult to explain the internet to those who spent decades watching the television or listening to the radio. In the 2020s, the more familiar day-to-day usage of Web3, metaverse, and NFTs becomes, the easier it will be to understand their value. NFTs attract strong reactions on both sides – good and bad; however, they are essentially programmable objects with enforced scarcity that can be bought or sold. This scarcity can be enforced online by blockchain or by a community, or offline by humans. You cannot “right click” and “save” a community. Today is a true cultural epoch for encouraging interdisciplinary thinking of economics, art, culture and technology. NFTs as collateral for loans, and yield generating art. Time-bound, limit-bound capabilities can put to rest the “paying for jpegs” narrative. NFTs can be used as a tool to define various attributes for enterprise applications, for example, through improving ownership possibilities and efficiencies, controlling or tracking via NFTs, and so on.

The metaverse exists in a wide range of distribution and experience formats. It is accessible to participants from current smart phones, evolving VR headsets, haptic devices, and gesture-based UI. Half-body avatars or hyper-real digital versions can evoke mixed reactions. Marketing with small elf-like versions in the metaverse to help or advise in a non-intrusive manner may be more acceptable. Crazy until it is not, lightweight devices at more accessible price points will improve adoption of the metaverse. Enjoyable experiences, hobbies, interests in sports, history, arts, science, museums, philanthropy, brands, etc. will be the first to gather interest. An ageing population around the world will experience convenience and less loneliness in AR/XR.

Banks and brokerages around the world are exploring VR, but how many are really embracing Web3?

Brokerages and banks in Korea have already begun to construct active virtual environments for their clients. BNP Paribas launched a virtual reality app allowing retail banking users to access their account activity and transaction records in a VR environment. Citibank has explored a program utilizing holographic workstations for financial trading. Bank of America announced that it will conduct VR training for employees in 4,300 financial service centers. But whether these are only AR/VR initiatives or whether banks plan to evolve parts of their services into a real metaverse is yet to unfold.

Germany’s Federal Ministry of Finance and the BaFin (Federal Financial Supervisory Authority) have introduced several laws and regulations in recent years intending to build a solid foundation for digital assets. Financial institutions have been allowed to have 20% of their assets in crypto since 2021. In 2022, about 400 savings banks in Germany, holding 1 trillion euros, will vote on whether to offer crypto trading to 50 million customers directly. DBS Bank has set up a digital exchange for tokenization and trading of digital assets, including cryptocurrencies, for institutional investors. AR is easily accessible via mobile phones, and mobile phones are likely to be the main distribution channel for the metaverse before VR sets become popular. Fintechs will not take long to become the “finverse” with their nimble infrastructure. Intuitive rewards and buy-now-pay-later for digital assets are already here. Meanwhile, Google has set up its Digital Assets Team after partnering with crypto exchanges.

The banking and financial services industries should consider new age technologies to sustain or improve RoE because the speed at which you can make money matters. It’s clear that we have multiple groups in society when it comes to the metaverse; one group is building and exploring; the second group doesn’t understand the space and finds it overwhelming or is far removed from it; and finally, the third group is sitting on the fence, waiting and watching. Familiarization, understanding, and purpose are vital and, as Chris Dixon, Partner at Andreessen Horowitz, suggested on Twitter Spaces, the onus largely lies on the first group to explain it or visualize it in better ways.

There are always new players on the market and older Web1 companies who should not be underestimated. So, CIOs and CMOs in financial services must continually update their technology radar. Embracing new technologies and being at the forefront gives a competitive advantage and strong differentiation in the new internet. NFT applications and metaverse implications, payment rails, and embedded finance present commercial opportunities for the financial sector.

How to architect or participate in the metaverse? 

What are the various business models? What is the lifecycle of digital assets and what should the tech stack considerations be for a roadmap to stay competitive and relevant? Listen to Capgemini Invent’s Future Sight podcast from October 2021 on the Architecture of the metaverse. Also check out our podcast on the Value of music NFTs, Cracking the code of musical creativity with NFTs, and the money involved in their ownership, royalties, and regeneration possibilities.


[i] Future Sight Podcast with Capgemini Invent: Introducing Banking, Payment and Wealth – the future of interactive gaming and esports and how they could potentially fit into banking. June 2021 https://open.spotify.com/episode/1E6maepzPDhry0fgADNuox?si=cc997da5451544fa&nd=1

[ii] Thinking in Bets; Annie Duke https://www.penguinrandomhouse.com/books/552885/thinking-in-bets-by-annie-duke/  Poker champion turned business consultant Annie Duke teaches you how to get comfortable with uncertainty and make better decisions as a result.

[iii] Fiat currencies are government issued currencies such as notes and coins for legal tender and not backed by any commodity such as gold, silver. They derive their value largely through the public’s trust in the issuers. https://en.wikipedia.org/wiki/Fiat_money, https://www.businessinsider.com/personal-finance/fiat-money?IR=T

[iv] https://www.youtube.com/watch?v=YShbzR7mlog  Chainlink Co-founder Sergey Nazarov discusses the fundamental need for deterministic cryptographic truth over the current system of probabilistic paper-based guarantees, and how Chainlink is facilitating this crucial societal transition.