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    De-risking banking in the metaverse

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    Banks are waking up to the metaverse’s potential to transform customer-facing operations by delivering next-generation engagement and interaction. However, the Metaverse, a virtual world packed with modern technologies such as non-fungible tokens (NFTs), augmented/virtual reality (AR/VR), and blockchain, comes with its own set of risks and challenges.

    For banks, some of these can have real-world implications, such as dealing with fraud and money laundering. There are also new issues, such as the definition of ownership of customer data generated within the metaverse. As banks seek to deploy metaverse strategies, it is important to understand risk mitigation and implementation challenges.

    Banking Challenges in the Metaverse

    The top concerns for banks in the metaverse revolve around security, privacy, governance and regulation. An Infosys survey reveals this, with 55% of banks citing security and privacy as their top challenges, 47% citing governance, and 41% citing authentication and identity management. None of the above are solely banking related, but they are of great concern to financial institutions. This is due to the extreme care taken when collecting, managing and protecting sensitive data of financial customers.

    Transactions in the Metaverse are primarily driven by cryptocurrencies and NFTs. First, cryptocurrency wallets must be funded with highly regulated fiat currencies. However, cryptocurrency regulation is still in its infancy and poses some security risks. Metabanking customers often fear cryptocurrencies being stolen or depreciated due to fraud or cryptocurrency volatility.

    Metaavatars are the twins of the real user, using biometric devices to mimic their own faces and sometimes using tactile gloves for sensory feedback. These devices certainly improve the customer experience, but they also help authenticate the identity of meta-avatars during banking transactions.

    Without rigorous identity verification, banks are at risk of fraud, deception and money laundering by malicious individuals posing as genuine customers. However, biometric devices present their own challenges of data ownership. To prevent unfair monopoly and unfair monetization through data mining, it is important to establish a trustworthy organization to process and manage such biometric data. Data privacy rules regarding ownership of such customer data should also be clearly defined.

    how technology advances

    Many banks recognize the potential opportunities and multifaceted cybersecurity challenges in the Metaverse. An Infosys survey found that 80% of bank CXOs feel ready for the Metaverse, but recognize that developing a Metaverse strategy requires additional skills. Fintech companies and technology solution providers can leverage their expertise here to help. Here’s how:

    • Codified Open Source Policy – Software developers can design privacy regulations using an open source approach. This enables metaverse data governance to be democratically adhered to rather than a single metaverse organization or oligopoly, avoiding unfair monetization and monopolies. An open source strategy can also incorporate dynamic rules for ownership and control of metaverse data through configurable privacy guidelines.
    • Setting standards – As with modern technology, it is important that building code enforcement remains fair and transparent. To this end, the Metaverse Standards Forum plays a key role with the aim of building an open Metaverse through collaboration of game designers, his Web3 companies and others. In addition, standards-building outcomes such as deployment guidelines will help banks improve their operations. Overcome security, privacy and regulatory hurdles.
    • domain expertise – Fintech companies can help banks advance their investments in the Metaverse by offering expertise in cybersecurity, authentication, or identity management. In parallel, IT solution providers can leverage their implementation experience to help banks de-risk their implementation. One example is the Infosys Metaverse Foundry, built to simplify and speed up how organizations navigate the metaverse through a Discover-Create-Scale methodology. This approach includes virtual and extended environments for customers, workplaces, products, and operations. Additionally, Foundry provides over 100 ready-to-deploy use cases, templates, and execution roadmaps to help banks rapidly align their capabilities to meet the opportunities of the metaverse.

    Conclusion

    The Metaverse has the potential to reimagine banking, especially in the area of ​​customer engagement. However, creating a digital twin of the natural world comes with several challenges, including standardizing the role of NFTs, ensuring customer privacy and data security, and strengthening regulation and anti-fraud measures. Despite these challenges, the Metaverse still holds a minefield of opportunity. Banks should therefore be aware of the risks and challenges and partner with fintech and technology companies. This will give access to practical solutions that overcome these challenges, ensuring a profitable investment and a new phase of growth for the Metaverse.

    Jay Nair is SVP, Industry Head of Financial Services and Public Sector at Infosys.

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