Unfolding the future of banking with web3 and metaverse

We are rapidly entering the age of Web 3 and the metaverse and are seeing new technologies and business models emerge that promise to transform the banking industry. All parties are affected by Web3 banking. This technology provides enhanced services to end users (retail bank users, corporations, and investment bankers). Users also get an immersive experience in a metaverse-simulated environment. They can continuously provide platform updates and improve interaction with AI modules embedded in metaverse avatars. Web3 technologies, such as blockchain, smart contracts, and NFTs, offer new and improved capabilities for the entire banking industry.

This article will show how Web3 will affect your banking business, particularly in borrowing, lending, and other uses.

The disruptive power of Web3

Web3 is the start of the third phase (hence "web3"). Its core feature, decentralization, marks its beginning. Open protocols were used to create the first web version. This allowed anyone to make it. Web1 did not capture any user data. Web1 did not capture any user data. However, Web 2 quickly evolved into a more centralized version of the web. This is where credit scores, identification, transaction history, and identification are collected, aggregated, and sometimes sold.

This model allows apps to be developed, delivered, and monetized. Prime stakeholders, including the owners, make all their functionality and governance decisions. The revenues are split between shareholders and management.

What does Web3 mean for banks?

Web3 and decentralized financing go hand in hand. Combining the two has been a trend in new ventures. They believe that people don't need banks for money management. These new platforms can be accessed via smartphones. The global smartphone penetration rate is expected to reach 83% by 2022. Stablecoin supporters and Defi supporters believe this allows large portions of the world's population to borrow, spend, and use digital money without the need to submit documentation or comply with regulations set by traditional banks. You can also use anonymous Web3 accounts.

The benefits of web-based banking

These are key blockchain opportunities for today's banking sector:

Quick financial transactions

In banking history, it has been difficult to transfer money and settle funds at near instantaneous speeds. Settlement clearing, which currently takes several business days to complete, will be faster. It will be instantaneous and move between days and seconds, regardless of time or day. Transaction and settlement fees for foreign currency remittances will be significantly reduced. Web3's disruptive potential can be realised without the user being aware of the underlying blockchain technology.

Credit reports based on blockchain

Credit reports can have a profound impact on customers' financial lives. Blockchain-based credit reporting can impact customers' finances more than traditional, central credit reporting. This allows companies to take into account non-traditional factors when calculating credit scores. This was a significant bottleneck in traditional credit distribution in financial sectors in the 19th and 20th centuries.

Compliance at a lower cost

Blockchain solutions offer transparency to stakeholders, full auditing, and a real-time overview of important documents that regulatory agencies might normally request access to. For example, the United States Federal Regulations require that banks be licenced to file suspicious activity reports for FinCEN (the Financial Crimes Enforcement Network).

How can Web3 in banking help daily banking customers?

Already, subtle changes are happening in how blockchain solutions affect the financial and banking sectors. For example, many fintech companies can purchase and send cryptocurrencies. These cryptocurrencies can also be used with traditional fiat currencies. As a result, bank transfers will be faster and easier to settle in countries with developed banking infrastructure. There will also be low fees for foreign remittances. Blockchain will have the first major impact on everyday banking customers' lives.

Use cases for Web3 in banking

These are some possible uses of Web3 banking:

Tokenized assets and securities

Investment banks already use tokens to represent custom securities, bonds, and other assets. Tokenization can bring you two important benefits:

• Creating securities and bonds according to customer requirements for seamless trading is easy.
• An asset can start auto trading using a smart contract, which allows banks and financial institutions to create an algorithm that minimises risks and maximises returns.

This shows how high-value assets such as diamonds and fine art can be tokenized with NFTs. This enables the item to be traded.

Central banks back the digital currency

The federal or central banks are currently working on digital currency that banks can accept. According to the RBI's most recent announcement in India, they intend to launch the Central Bank Digital Currency before the crypto-bill is enacted in parliament. According to the Union Budget announcement, CBDC will be introduced in FY23. This CBDC will be treated as bank notes under the Financial Act.

Monetization of Games through Bank Payment Options

Online gaming is rapidly gaining popularity. Payment integration in the virtual world is possible for banks using Web3 banking. Neobank, for example, recently announced the creation of a virtual exchange system that allows users to transfer value from the virtual world into the real world. The bank holds the game tokens and allows the player to use them as a loan.

Virtual banking

The metaverse allows you to visit banks virtually through Web 3. This is an important use case for Web3 banking. Consumers can use their avatars to visit a virtual branch of a bank, interact with staff, and make transactions online. Remote services have become a popular trend since the pandemic. The immersive nature of the metaverse allows consumers to interact with advisors more comfortably from their home. Financial planning, financial reviews, and virtual portfolio reviews can all be made possible by the metaverse.

Employee onboarding

The metaverse in Web 3 allows for 1:1 virtual meetings and employee training. Banks can use these technical capabilities to bridge communication gaps between employees in tier 2 or tier 3 cities and employees from tier 1 cities. This fosters strong employee bonds and simplifies the customer-handling process, making it easier and more efficient.

Endnote

Banks have many options to embrace the web of the future, i.e., web 3. Banks can use Web3 to reach new customers beyond their traditional channels. Customers can integrate online platforms, digital wallets, and currencies to access key services. Secure storage at the institution level is possible for digital collectibles, virtual currency from video games, or NFTs.

If you plan to implement a Web3 for banking in your banking business, PerfectionGeeks' Web3 experts can help. For enhanced banking solutions in Web3, contact us.