Imagine a future where banking neither entails the trouble of a Physical Branch nor the impersonal experience of Internet Banking.
In this new banking realm, you enter a virtual bank, where a digital version of your banker greets you. You interact, perform complex transactions and seek real-time financial advice as if you were in a real branch. Banking becomes more personalised and interactive as the lines between physical and digital banking blur.
This immersive 3D environment where individuals and organisations can interact through avatars, visit, and transact in virtual offices and even own assets, is what we call Metaverse. Popularised by the 1990s novel Snow Crash, the metaverse is now a growing reality.
The concept has evolved from mere entertainment value of 3D games to more sophisticated use cases, driven by investments by tech giants. Facebook’s rebranding to Meta in 2021 added momentum to its growth. Today users can buy digital assets, offer services, participate in virtual events, and engage with others on various metaverse platforms like Decentraland, Sandbox, Roblox and many others.
Metaverse opens the door to reimagine banking by creating full-service virtual replicas of physical bank branches, which could revolutionise customer service, engagement, and transactions.
Metaverse Banking: A Virtual Frontier
Metaverse Banking takes us beyond what today’s physical and digital banking can offer. It promises an interactive, real time, face-to-face experience—whether you’re negotiating terms, seeking clarifications, discussing tailored credit needs, or exploring investment options.
In early 2022, JP Morgan became one of the first global bank to launch a virtual presence with its “Onyx” lounge in Decentraland, offering users an immersive glimpse of 3D banking. HSBC and Standard Chartered followed by acquiring virtual real estate in platforms like the Sandbox, signaling their intent to explore metaverse.
South Korea’s Kookmin Bank introduced virtual reality (VR) branch testbed in 2021, allowing customers to receive financial consultations and explore banking services in their virtual branch where teller window can manage remittances, while a bank employee inside the VIP lounge can help clients evaluate profiles and portfolios. Inside the main hall, customers can access their personalised financial information.
Bank of America used integrated VR headsets that create immersive simulations, helping employees practice interactions with customers in a controlled yet dynamic environment.
These initiatives, although experimental, represent the beginning of what could eventually evolve into full-service virtual banking- an interactive virtual world that unlocks new ways for customers to engage with their banks.
This banking future is exciting but various technical, regulatory, and economic issues need to be addressed before metaverse banking can securely function at scale.
Technological Foundations
The promise of the metaverse in banking hinges on several key technological advancements. We look at 4 key aspects.
1. Computing
For metaverse to be widely adopted, it should closely resemble the real world, whether it’s rendering a lifelike avatar of a banker or replicating the ambience of a bank branch in a virtual world. Technologically this translates to high-end graphics, which is an extremely resource-intensive task, requiring significant processing power to maintain the high fidelity in virtual environments. Some estimations indicate that this will require a 1000x increase in computational power compared to what is available today, going to petaflops with latency less than ten milliseconds (1 petaflop=1000 teraflops). While leading chip manufacturers are working to meet these demands, the imagination of what is possible in metaverse moves at a much faster pace.
Further to this, there is also a question of affordability of such cutting-edge computing power, both at the development side as well as user side, without which metaverse will remain a peripheral play.
2. Real-Time Data Processing
Beyond the visuals, metaverse also needs to enable dynamic reaction to user input and real-world data (e.g., motion and speech), in real-time and with minimal latency. This makes traditional centralised cloud architecture inadequate to handle the scale and complexity of virtual banking. To reduce latency, banks will need to adopt decentralised data processing architecture like Edge Computing and Fog Computing. In Edge computing data is processed closer to the user, rather than routing it through a distant centralised cloud, minimising lag and ensuring a fast, real-time experience—critical for financial transactions where speed and accuracy are paramount.
3. Hardware for AR and VR
One of the key challenges to the widespread adoption of metaverse banking is the form factor of Virtual Reality (VR) hardware . Current VR and Mixed Reality (MR) headsets, such as the Vision Pro, Meta Quest, HTC Vive, and Microsoft HoloLens, offer great entertainment value but struggle with issues of ergonomics, portability, and cost, limiting their mass adoption. Although companies like Meta have made progress with the launch of limited functionality Ray-Ban glasses and the more advanced Orion smart glasses, achieving the ideal balance between full functionality and affordability is still some distance away. Striking this balance is essential for scaling complex use cases in banking.
Going a step further, seamless transition between the real and virtual worlds is crucial as well. Currently, dependence on accessories like headsets and hand-held controllers, while useful, is still a barrier. Advancements in Auto Stereoscopy (enabling 3D viewing without glasses) and light field displays (display without the need for screen) could eventually reduce the need for clunky hardware and enhance holographic experience.
Extension of this is the need to ensure real-time interaction between the virtual and physical worlds. This requires advancements in IOT capabilities (Internet of Things), to enable smooth communication between various digital and physical devices. Examples of this already exist with Digital Twins, which are virtual replicas of physical objects like machines. These virtual models simulate real-time operations based on data from physical sensors, showing how a machine is functioning through continuous live data feeds.
Another critical area of development is motion sensing. Devices like Kinect and Leap Motion have advanced significantly in gaming, and need to be embedded in everyday devices, such as mobile and laptop cameras, offering a full range of motion-sensing capabilities for virtual environments.
All these developments need to come together to provide standardised, easy to use setup to experience metaverse.
4. Interoperability
Interoperability is a key technical challenge for metaverse banking. Currently, virtual assets and services are limited by platform specific standards, preventing seamless interaction across different metaverse environments. For example, virtual assets owned in Roblox cannot be transferred to Sandbox. Similarly, if a bank operates a virtual branch in Decentraland, customers will face difficulty in continuing their interactions or transferring assets across platforms, limiting the user experience. To overcome this, interoperability and standardisation across platforms is essential.
One part of the solution is blockchain technology, particularly NFTs (non-fungible tokens), which allow for ownership, trading, and transfer of digital assets. Using Blockchain can facilitate standardisation of banking essentials like loan contracts, digital identity, or other financial instruments. However, interoperability between various blockchains in itself is an area of ongoing development.
Metaverse Standards Forum and Open Metaverse Foundation, are some recent initiatives to develop shared protocols and frameworks to address these limitations.
Economic Structures and Regulations
While technological advancements in the metaverse are progressing rapidly, the bigger challenge, particularly for banking, lies in establishing a viable economic structure. This largely remains an uncharted territory.
First issue is about payments– how would transactions be settled securely in a space where geographical boundaries are irrelevant? While NFTs and Cryptocurrencies are already a part of the digital economy, scaling these for wider adoption in banking requires a regulatory framework that doesn’t yet exist. In fact, regulators have shown their discomfort with the current crypto ecosystem. One potential solution could be Central Bank Digital Currencies (CBDCs), which offer a regulated form of digital currency, but these are still in their early stages of development and their cross-border mechanics are yet to be established.
Next issue is about recourse for contractual obligations. As adoption increases, contracts for services on metaverse and conflict resolution mechanisms will require a well-defined legal framework to establish a reliable business ecosystem.
Valuation of digital assets presents another challenge. Establishing new benchmarks and institutional mechanisms for valuing assets that are not bound by geography is a daunting task. There will be new asset classes for which avenues of finance may open up. This is particularly challenging as digital assets are often fluid and decentralised, making traditional valuation models difficult to apply.
How banks handle their rights for virtual real estate, enforce contracts, value assets and ensure the fulfilment of virtual services are issues that need to be thought through.
Security and Privacy
Banking is built on trust, and any breach in the virtual world could severely undermine customer confidence. Past incidents have already exposed the vulnerabilities of metaverse banking, where the absence of proper legal frameworks and security measures led to significant losses. The case of Ginkgo Financials is one such example. The platform offered banking services in the metaverse with promises of 30–40% returns. It abruptly shut down, wiping out nearly $200 million of investor money, with no trace of the company.
With increasing digital presence, the challenges of cybersecurity and privacy become more pressing. Banks will need to prepare for threats like identity theft, fraud, and data breach on a much larger scale.
One solution for identity management is Digital Twins. A digital twin is a virtual replica of a real-world entity, and in banking, this concept can be used to securely link a user’s real-world identity to their virtual avatar in the metaverse. As this digital twin interacts with the virtual world, it can process and reflect real-time financial activities, such as loan applications or investment decisions.
Decentralised ledgers and Smart Contracts can further help enhance security. A decentralised ledger ensures that all transactions are recorded on a blockchain, making them transparent, immutable, and verifiable. Smart contracts—self-executing contracts with the terms of the agreement directly written into code—can automate processes, ensuring transactions are pre-authenticated and executed without the need for manual intervention, reducing the risk of fraud.
End Note
Metaverse holds immense potential to transform banking, but its path to widespread adoption is complex. Beyond technology advancements like Processors, Edge computing, IOT, VR/MR, and Blockchain, the challenges lie in establishing regulatory frameworks and economic models that can support virtual banking at scale. Issues around data privacy, security, and interoperability need to be addressed to build trust in this space.
While the pace of technological innovation is rapid, regulatory structures and trust-building efforts will take time. For banks, the focus should be continue experimenting with virtual environments, developing their digital capabilities, and preparing for the future. This proactivity will ensure they are better positioned when these foundational aspects are ready for large-scale adoption.
Note: This article builds on the concepts explained in the FrankBanker Podcast E6: METAVERSE & BANKING: Real vs Imaginary. Click here to watch
Disclaimer: The opinions expressed here are those of the author and does not reflect the views of FrankBanker.com