Western banks prefer metaverse to emerging markets
15/06/2022 07:00
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RNS Number : 8866O Tintra PLC 15 June 2022
15 June 2022
TINTRA PLC
("Tintra", the "Group" or the "Company")
Recent Press Articles
"Western banks seem more likely to enter the metaverse than emerging markets"
Richard Shearer, Group CEO, recently authored an article on "Western banks
seem more likely to enter the metaverse than emerging markets", which was
published in Global Banking & Finance Review, a leading Online and Print
Magazine, which seeks to provide a more balanced view, for informative and
independent news within the financial community. The article can be viewed
online at:
https://www.globalbankingandfinance.com/western-banks-seem-more-likely-to-enter-the-metaverse-than-emerging-markets/amp/
(https://www.globalbankingandfinance.com/western-banks-seem-more-likely-to-enter-the-metaverse-than-emerging-markets/amp/)
A full copy of the text can also be found below.
For further information, contact:
Tintra PLC 020 3795 0421
(Communications Head)
Hannah Haffield
h.haffield@tintra.com
Website www.tintra.com
Allenby Capital Limited 020 3328 5656
(Nomad, Financial Adviser & Broker)
John Depasquale / Nick Harriss / Vivek Bhardwaj
Western banks seem more likely to enter the metaverse than emerging markets
By Richard Shearer, CEO of Tintra PLC (https://tintra.com)
When it comes to digital change and the embrace of new technologies, Western
banks are becoming increasingly forward-thinking - an attitude which they have
yet to apply to their relationships with emerging markets.
This proactive approach towards (limited) change shone through in a recent
speech
(https://www.bankingsupervision.europa.eu/press/speeches/date/2022/html/ssm.sp220113~8101be7500.en.html)
by Pentti Hakkarainen of the European Central Bank, who was quick to point
out that customer demands and pressures to increase efficiency "are leaving
banks with no option but to use modern technology." Of course, as this
phrasing implies, embracing digital change doesn't always come easily to
incumbent banks who inevitably shoulder the weight of legacy infrastructure.
Nevertheless, as a 2020 report from the OECD
(https://www.oecd.org/competition/digital-disruption-in-banking-and-its-impact-on-competition-2020.pdf)
spells out, "banking is undergoing a transformation from being based in
physical branches to using information technology (IT) and big data" - and
Western banks are well aware that if they don't embrace this kind of
transformation, there are plenty of FinTechs and neobanks ready and willing to
fill the gap.
The report goes on to note that this tech-based competition may well lead to
increased risk-taking from incumbents: a change in attitude which, while
encouraging, equally invites us to raise an eyebrow at the areas in which
Western banks have let perceived risk dominate their actions - including their
reluctance to enter emerging markets.
Digital change
It's not controversial to state that Western banks' recent transformations are
a product of evolving expectations from consumers.
As a recent report from EY
(https://www.ey.com/en_gl/banking-capital-markets/how-can-banks-transform-for-a-new-generation-of-customers)
noted, today's consumer expects their entertainment delivered via a
frictionless streaming service, and they expert their shopping to be conducted
through a few taps on a smartphone - so, naturally, financial services are
conforming to similar principles.
And, of course, incumbents are by no means in the clear when it comes to
meeting those expectations - the EY report does go on to say that while
incumbents are still ahead when it comes to primary financial relationships
with customers, fully digital neobanks are "gaining ground" in a way that
should concern the banking sector.
All the same, between potent competitive pressures on the one hand and the
increasing weight of consumer expectation on the other, it's no wonder that
the likes of Kearney have found that most banks are accelerating their
digital strategies
(https://www.kearney.com/financial-services/article?/a/going-digital-the-banking-transformation-roadmap)
- they really have no other choice.
In fact, Western banks' new-found willingness to consider fresh technological
avenues is exemplified by a particularly striking form of digital
acceleration: entry into the virtual worlds of the metaverse.
Becoming a part of the extended reality
While establishing a presence in the metaverse might seem par for the course
in the context of some disruptive newcomer, several big-name incumbents have
been quick off the mark - in fact, they've literally marked their territory in
some instances through the use of Decentraland, a 3D virtual space in which
users can purchase plots of digital land.
Such was the widely-reported case
(https://www.forbes.com/sites/ronshevlin/2022/02/16/jpmorgan-opens-a-bank-branch-in-the-metaverse-but-its-not-for-what-you-think-its-for/?sh=32b5ebad158d)
for JPMorgan, which now boasts a metaverse "lounge" - a move made in
anticipation of widespread customer adoption of this latest tech trend.
At present, of course, this lounge is just a largely empty space - but given
the close links between the digital worlds of the metaverse and digital
currencies, including decentralisation and the use of blockchain, and bearing
in mind the growth of online transactions more broadly in recent years, there
will soon be fully functional banks that operate entirely within the metaverse
- with Tintra building, what we believe to be, the world's first Web3 enabled
bank.
According to a recent prediction
(https://www.gartner.com/en/newsroom/press-releases/2022-02-07-gartner-predicts-25-percent-of-people-will-spend-at-least-one-hour-per-day-in-the-metaverse-by-2026)
made by Gartner, 25 per cent of people will - as soon as 2026 - spend at
least an hour per day in the metaverse.
By this point, the firm anticipates that this kind of virtual reality won't be
the sole province of video games - instead, users will spend their hour or
more engaging in work, education, shopping, and social interactions,
highlighting the value of banks swiftly staking their claim to the metaverse
and related technologies.
Even leaving aside the complexities of digital currencies and banking
functions, banks will simply need to ensure they can engage with customers -
and, if Gartner's projection is correct, a portion of that engagement will
need to take place in virtual locations.
Continued perceptions of risk for emerging markets
While incumbents are undoubtedly making sensible moves towards digital change,
it's difficult not to make this kind of comment without a tinge of
exasperation: for all their forward thinking, Western banks are more prepared
to enter virtual reality than emerging market countries.
According to research from BIS
(https://www.bis.org/publ/qtrpdf/r_qt1903b.htm) , emerging markets have seen
huge decreases of reliance on foreign bank credit from 2008-2018, underscoring
Western banks' lack of presence in such countries.
The reason for this kind of retreat is, as I've mentioned, due to perceptions
of risk: as one
(https://www.economist.com/finance-and-economics/2019/06/14/buy-out-firms-are-the-new-banks-in-emerging-markets)
Economist
(https://www.economist.com/finance-and-economics/2019/06/14/buy-out-firms-are-the-new-banks-in-emerging-markets)
report
(https://www.economist.com/finance-and-economics/2019/06/14/buy-out-firms-are-the-new-banks-in-emerging-markets)
puts it, Western banks "have shunned faraway borrowers since regulators
asked for more capital to be held against exotic bets."
Of course, the irony here is that while incumbents are reluctant to enter
emerging markets, choosing instead to direct their more progressive
inclinations towards digital change, emerging markets are comprised of young,
tech-savvy populations who would be fully prepared to engage with digital
financial products.
Just a glance at McKinsey's Personal Finances Survey 2021 analysis
(https://www.mckinsey.com/industries/financial-services/our-insights/emerging-markets-leap-forward-in-digital-banking-innovation-and-adoption)
is enough to solidify this claim, with the firm noting that:
"Consumer use of digital banking in Asia-Pacific has entered a stage of
acceleration, fuelled largely by innovations launched in emerging markets.
Nearly nine in ten consumers across the emerging and developed markets of the
Asia-Pacific region use digital banking actively, and most of these are open
to purchasing more banking services through digital channels."
As such, while Western banks are wise to enter digital spaces like the
metaverse, this forward-thinking approach falls short of truly taking
advantage of worldwide demand for digital services.
As incumbents embrace digital change while refusing to change their attitudes
towards tech-hungry markets, it remains to be seen whether or not Western
banks are - as they say - missing a trick.
ENDS
https://tintra.com (https://tintra.com)
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