Digital identities will connect the Metaverse to banking 

Matt Peake, Global Director of Public Policy at Onfido 

 

From HSBC to JPMorgan, many financial services firms are exploring the possibility of creating customer experiences in the Metaverse. With the total value of the virtual environment forecasted to hit $36 billion by 2025, this interest comes as little surprise. Despite this, even the most enthusiastic stakeholders don’t yet have a clear grasp of the technology. There is a lot of work to do to build trust in the experience before the industry can unlock mass adoption.

According to Meta, the Metaverse is “a set of virtual spaces where you can create and explore with people who aren’t in the same physical space as you”. In financial services, this could mean an immersive virtual environment which allows on-demand interactions with accessible bank tellers or support agents in virtual branches.

While this concept might seem simple, the principles that will make the Metaverse a safe place have yet to be established. Today, customers walk into a branch and see various physical indicators of security, be it a large vault or a security guard. These provide a certain peace of mind that must be replicated in the virtual world so customers can trust the experience. It’s here that access to the Metaverse enters the spotlight; particularly in the highly regulated world of banking, it’s a process where verified digital identities could make or break its potential.

Understanding the virtual identity challenge

Unlike the real world where employees can gauge body language, it can be harder to spot suspicious behaviour in the Metaverse. People create digital avatars to represent themselves and their actions carried out virtually. This makes tying such an avatar to a legitimate human identity even more important to keep users safe. In virtual worlds where appearance is customisable, the potential for fraud is greater than ever.

This may not carry an immediately apparent threat, but for financial services, it has the potential to open the floodgates to nefarious actors. Scanning faces or photos to create ‘realistic’ avatars without first verifying that the likeness and the person creating the match could present opportunities for fraud and mistrust of the system.

While keeping identities hidden online can be vital in protecting minorities and other vulnerable users, fighting repression and corruption, it’s not always an option in highly regulated industries such as financial services. This means it’s crucial that banks and other financial organisations have a method of verifying identities to keep transactions secure.

For instance, as trading digital assets such as cryptocurrencies and NFTs become more commonplace and potentially lucrative, the Metaverse could become a new frontier. Unfortunately, this will likely make it a clear target for fraudsters and cybercriminals.

Regardless of what an individual’s avatar may look like, it is vital that others can trust they are who they say they are – or at least are a real person and not an automated bot. In most cases, this means highlighting in the Metaverse when a user identity has been matched with a genuine human identity. Providing the opportunity for such verification will enhance trust and confidence in virtual environments and boost their uptake in banking.

Bridging banking with virtual worlds

Verifying the identities of Metaverse inhabitants will be crucial to its success for financial institutions. From an operational perspective, the Metaverse has the power to revolutionise the back-end of banking by bringing together the benefits of in-person and remote communication, eradicating the issue of finite resources and allowing each employee’s avatar to access tools that optimise their experience. But organisations must carefully consider the implications for access management before financial services hit the virtual arena.

On the consumer-facing side, looking beyond enabling innovative customer service interactions, age verification will also play an important role – perhaps determining whether someone is eligible to open a bank account or access other restricted products.

To prevent illegal attempts to access restricted content, online identity verification needs to be swift and robust, with the appropriate level of privacy and security. For instance, asking a question to a support agent in a Metaverse branch and needing to withdraw money from an account will require different levels of identity verification. While helping users see which avatars have a ‘verified’ real identity connected to them will play a crucial role in mitigating the early reports of nefarious activity, the level of verification should be scaled based on risk so that it doesn’t impact overall experience.

The problems we face in the broader online world mirror many of the ones we will face in the Metaverse, potentially compromising the processes needed to protect financial services institutions from fraud. Verified digital identities can make or break the potential of the Metaverse in banking. As such, those building it – and the banks looking to utilise it – must ensure that safety and security is at its core to maximise its full potential.

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