Ceaseless banking change - from all angles

Global tech giants are pouring billions of investment into the metaverse. Shareholders are starting to ask businesses (including banks) about their metaverse strategy. The consensus is that the metaverse is coming and it will change everything. 

The idea of a global, consumer-focused metaverse as a freely accessible, multi-experience open space is still some way away. Rather, we have a series of mostly unconnected spaces, or metaverses, that are rapidly evolving and one day may come together to form "the metaverse".  There are some practical hurdles to overcome, such as building suitable 5G and fibre optic infrastructure to create sufficient bandwidth to power this virtual colossus. The key to the full potential of the metaverse is interoperability – the ability for a consumer's avatar to freely access multiple platforms in one unified space. It's also important to acknowledge that metaverse technology has many industrial, manufacturing and systems applications, which will operate in a completely different way from the consumer-accessible metaverse.  

The practical application of the metaverse for education, training, gaming, retail and tourism is already well rehearsed.  What banks must now work out is how the metaverse will enhance customer experience. There may be novelty in the potential for your avatar to visit a virtual branch, but will it make it easier or quicker to make payments or investments or access information or financial advice?  How will different customers be affected if accessing financial services in the metaverse becomes normal practice? Some customers (for example with accessibility needs) may find the technology significantly improves their access to banking services and financial advice.  That said, the short to medium term value is more likely to be found in connectivity with other businesses and the ability to leverage customer behavioural data to hyper-personalise products so that customers experience real value in accessing the metaverse.  

In addition to exploring the practicalities and commercial potential of the metaverse, banks must also consider how to manage the associated risks. As with the advent of the internet, once the metaverse has critical mass of use, legal questions will come into sharp focus like who owns or shares in the value created by interactions in the metaverse? How is identity verified and fraud risk managed? How is cyber security managed and consumer privacy protected? What safeguarding measures should be in place? It has taken 30 years to address these questions in relation to the internet (and some cases they remain unanswered). Can that experience now be leveraged to anticipate the challenges inherent in the metaverse?  

Data will become increasingly valuable. Banks hold valuable personal transactional data that other businesses in the metaverse will be keen to access if they are able to. Consumers will be divided about how much they want to share their data to get a bespoke experience in the metaverse, and how much they want to retain their privacy. They may choose to opt into systems which allow them to selectively share and monetise their own data. Collection and ownership of data, protocols for sharing, consumer rights and user privacy need to be fully explored. Political considerations about the potential for hostile activities, domestic and foreign, surveillance and censorship will also come into play. Cross border governance and enforcement of rights and the related evidential issues will all become more complex. These issues have not yet been fully resolved in connection with the internet. They will be amplified in the context of the metaverse, requiring a level of cross border governmental co-operation never before seen.  

In the meantime, what practical steps can banks take to prepare for the metaverse? Banks will undoubtedly want to explore and test how the metaverse might enhance customer experience and what commercial benefit banks might derive from that. Additionally, it has never been more important to ensure that robust systems and protocols are in place to collate, store, manage and share personal transactional data in a safe, transparent and informed way. 

To discuss the legal implications of your organisation's metaverse strategy, please contact Helena Brown and Harriet Territt.