Banking on the metaverse
Microsoft’s recent acquisition of Activision for $68.7 billion is their largest one yet and cost over 2.5 times what they paid for LinkedIn.
This is their third acquisition in the gaming space and with almost one-third of the global population playing games, it’s an attractive segment to target.
However, the acquisition potentially also accelerates their future towards having a solution(s) for the metaverse. This would allow them to compete more aggressively with Meta/Facebook, whose recent name change and announcements have made it clear that they see their future in the metaverse.
The question for banks is what is their role in the metaverse? One possible link could be to assist those wanting to buy property in the metaverse on platforms like Decentraland, Axie Infinity or Sandbox.
Plots of virtual land have been selling for millions to consumers and corporate brands. Typically, price is driven by what your virtual plot is near to.
For example, the average plot on Sandbox is around $13,000. However, a plot near to those owned by rap star Snoop Dog sold for $450,000. The most expensive purchase was by Republic Realm for $4.3 million, who currently own around 2,500 plots of virtual land in 19 virtual worlds.
Immediate questions for banks would be how the land is valued, how could they de-risk loans, how would they handle crypto transactions
For buyers, the main risk is the volatility of crypto. Imagine buying a plot for 10 Ethereum and seeing the price halve in less than two months (as has happened recently).
Proptech company MoveStreet recently acquired their own plots on Sandbox as a way to explore how virtual and physical properties could be sold in the metaverse.
Accelerated by Covid, virtual property viewings
A non-financial opportunity in the metaverse for banks could be virtual meetings. For example, using avatars in a virtual recruitment interview
Circling back to gaming, I believe there is an opportunity for banks to combine financial education and planning
Gamifying the experience has got to be better than the current process, which involves lots of form filling and boring interviews.
It is clear cryptocurrency is going to be tightly linked to the metaverse. The gaming industry has already shown that. As such, other ways banks could get more involved in the metaverse is by providing crypto services like custodial or trading
Like having a website, having a presence in key virtual worlds seems inevitable, and as I said in?my previous article about the metaverse, the best time to understand the possibilities is now. However, we are some years ahead of “mass adoption” from the average non-gaming consumer. Therefore, bank investments for the metaverse should be from R&D spend.
Using Gartner’s hype cycle terminology: it’s arguable whether we have reached the peak of inflated expectations, but it is clear we are nowhere near the trough of disillusionment yet.
I’m not saying banks shouldn’t invest in the metaverse, I’m just saying that bank spend on the metaverse won’t provide an ROI for a long time yet.
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