How Will the Metaverse Revolutionize Financial Technology (FinTech)?

In 2022, the first ever bank to enter the metaverse was JP Morgan, an American financial service behemoth. It acquired a substantial territory in Decentaland.  Moreover, a wandering tiger is featured in their Onyx Lounge. After that, a South Korean Bank named Kookmin also extended their customer services to Metaverse by offering one-on-one consultations through Metaverse.

These companies were then followed by HSBC as it established an office in the metaverse’s Sandbox territory. There are many more examples of fintech institutions making their way to the metaverse probably for the sole reason of being able to offer a unique financial services experience to their customers. Of course, they would have to utilize high-quality financial software development services to employ their fintech solutions in the modern virtual world called the Metaverse.

What is Fintech and What Does it Have to Do with the Metaverse?

Fintech is a combination of two words: finance and technology. When technology is utilized to improve the usability and effectiveness of financial services, it’s called fintech. It involves apps for AI-enabled financial advisory services, blockchain-based payments, online investment systems, and mobile banking. A business has to collaborate with a financial software development company to create such fintech solutions. And that led to the increasing growth of fintech, where they are now working under experimental areas like metaverse, a blockchain-powered distributed online world.

What is the metaverse?

In an online environment that exists in Web3, is decentralized, and powered by blockchain, there exists a virtual universe called Metaverse. People can use hyper-interactive tools like virtual reality to enjoy digital content, collaborate on it, share it, or just communicate with each other in this virtual space.

Although there has been a lot of progress recently, the acceptance and engagement with this virtual place are very limited. Maybe because it is still budding. Eventually, it may become an important aspect of our daily lives similar to social media from web2.

Some experts have claimed that the metaverse could someday even supersede the physical universe as a center of interaction and communication with people and companies, especially in the case of financial transactions and other services.

Just imagine there is a virtual land with objects, avatars, buildings, and more where you can buy and sell things exactly like you do in reality. You can visit various buildings and facilities as well as attend virtual events. In the end, you become a part of a virtual world that has a similar economy as the real world. This would be hugely profitable for fintech companies.

Top Fintech Use Cases in the Metaverse

Currently, companies are leveraging financial software development services to make the metaverse use cases act as their entry points for fintech, which are as discussed below:

1. Digital assets

Metaverse offers a trading platform where NFTs, digital currencies, and many more digital assets are traded easily. Metaverse also allows fintech companies to leverage their decentralized infrastructure to create new secure trading platforms that are open to a wide range of products, goods, and services.

2. Decentralized marketplaces

Metaverse enables businesses to create and maintain virtual marketplaces. The users here can exchange digital currencies for goods and services. All the transactions are held under a decentralized setting which is secure as well as accessible by the user from any location.

3. User-centric financial services

Utilizing Metaverse renders an opportunity for fintech companies to create immersive UX with the help of AI and 3D avatars. They are used to build VR financial advisors that can offer personalized financial advice to users.

4. DeFi apps

DeFi means decentralized Finance application is a rapidly growing field in the finance industry. It is largely used to create a decentralized financial system with the help of metaverse and blockchain. It acts as an alternative to traditional financial institutions but with more user-centric controls, openness, and improved safety.

5. Immersive financial education

Just as the case with immersive financial services, so, is the case with financial education. Metaverse enables fintech companies to hold financial education programs and virtual workshops. This is extremely helpful to the user as it enhances their financial knowledge and provides valuable insights in a more engaging setting. In addition to that, the metaverse is also extremely helpful in increasing the affordability and accessibility of financial education.

6. Gamifying financial services and granting rewards

Metaverse has the potential to radically transform financial services. It can also encourage the users to increase their engagement with fintech apps by offering them rewards for it. For example, the metaverse turns the financial responsibilities of a user into small activities that are related to an adventure. In short, gamifying the whole financial services where the users are reimbursed with digital currency for achieving their financial responsibilities or doing adventure activities like building treasure hunts and more.

7. Identity verification and user authentication

Identity verification at Metaverse is very secure and decentralized because of the use of blockchain. It is a type of system where the identity of the user is verified before providing them with any type of financial services. This helps greatly in reducing the possibility of identity theft and fraud.

8. Metaverse-based wallets

Metaverse enables the users to store, receive and send tokens with the help of a metaverse-based wallet. This wallet comes in handy while developing and distributing digital assets. Meta is currently working on blockchain wallet projects for widespread user adoption.

9. E-commerce

Another clear use case of fintech in the metaverse is eCommerce. Just like the marketplace and classrooms, the metaverse also allows companies to build virtual stores for users to shop from the comfort of their homes.

10. Advanced digital banking

All types of financial services are supported in the metaverse from creating a bank account to giving out loans. Banks can leverage such facilitations to their advantage by conducting online sessions, events, and operations in the metaverse. This will not only benefit the existing customers but also attract new customers from digitally advanced demographics.

Benefits of Integrating Metaverse with Fintech Platforms

Metaverse is very beneficial to fintech companies. Let us discuss a few of them here.

1. Virtual Economy

Metaverse is not the same as any traditional virtual environment, there are a lot of differences between them. Metaverse determines how crucial a role blockchain and cryptocurrency will play in the future. Metaverse allows people and businesses to engage in a variety of activities that generate value. After that, this value can be easily passed on to other metaverse entities. And all of these transactions will be dependent on fintech.

2. Decentralized systems mean equal opportunities

No government or company would have total control over Metaverse in the future. It will contain multiple platforms. So, the data as well as the experience of users will be decentralized. It’s a way to bring down the monopolistic culture of the social media age and encourage healthy competition between fintech organizations.

3. Easy integration

It’s an aim, to create a space within the metaverse where users can transfer their experiences from one environment to another. As of now, the experience of any platform remains on that platform alone which increases the efforts of the fintech businesses. But with the help of Metaverse, they can easily transfer their data so that developers can easily replicate those services for other environments as well. 

4. Fintech is indispensable for the growth of metaverse

Fintech is a way to explore options users can enjoy or use metaverse. For example, blockchain-based systems allow users to trade virtual real estate properties. There are more creative ways to interact with the metaverse and many new ways are invented almost every day. With the growth of the metaverse, the fintech industry is bound to position itself as one of the most long-term beneficial sectors and you will need the help of a top-rated financial software development company to help you build an immersive user experience for your customers in the metaverse.

Way Forward

Both metaverse and fintech are blooming and booming industries. However, three challenges stand in their way to success.

• Compliance uncertainties: The finance sector is regulated strictly so fintech startups have to navigate through a complex web of law. As for the metaverse, and blockchain architecture, they have their own set of problems.

• Web 3.0-ready cybersecurity: Securing financial data has never been more crucial as cyber crimes are on the rise. Protecting the financial data of their customers must be the priority of fintech companies. They must employ advanced security measures to protect even 3D and spatial information.

• A steep learning curve: The most important challenge will be to encourage customers to adopt the metaverse offerings and services from the Fintech companies. Getting along with metaverse-based fintech services would be very difficult for customers who aren’t familiar with decentralized systems or immersive environments.

• Challenges in scaling: The growth of fintech is a sign for businesses to be prepared for the increased demands of the customers, i.e. to be scalable. But the major barrier to that scale-up is the infrastructure of the metaverse itself. It’s too expensive for enterprises and large businesses then how come fintech startups are going to fit it in their budgets?

Despite all these challenges, fintech companies are going to be the central focus of the new age Web3 and all the online interactions on the metaverse. And financial technologies are still in their primary phases which tells us that there is a lot of room for development and that all the challenges can be solved in the near future.