Technology

A powerful Wall Street bank joins the metaverse: what plans does it have to lend money to people in the virtual world

J.P. Morgan Chase & Co.
J.P. Morgan Chase & Co.

JP Morgan bank has opened a “branch” in the metaverse in a move that anticipates the move of its global competitors.

A Forbes article reports that “JP Morgan announced the opening of a ‘room’ at Decentraland. Upon entering the lounge – which was created by Onyx, the bank’s blockchain unit – visitors are greeted by a digital portrait of Jamie Dimon (morphing into the image of the bank’s head of crypto) and a walking tiger.”

In the room you can see “a wall promoting the bank’s achievements in blockchain and watch a video of the June 2021 Chase Fintech and E-Commerce Forum.”

Cornerstone Advisors Director of Fintech Research Alex Johnson said in his Fintech Takes newsletter: “At some point in the future, the digital worlds being built today may have added enough user attention and engagement that financial services companies need to invest in the metaverse as a customer service and acquisition channel.”

“But we are not there yet. Until the metaverse is a little less empty, resist the urge to colonize it with branches and billboards.”

Other analysts, however, “believe that banks should establish bank branches in the metaverse.” According to IBS Intelligence, “virtual branches are the next logical step in how financial institutions can use virtual reality. Imagine never having to take a break during business hours and wait in line at the bank.”

The metaverse adds actors
The metaverse adds actors

“Now imagine receiving a personalized banking service in the comfort of your home, when it suits you while enjoying a cup of coffee.”

In this sense, according to Forbes, “JP Morgan does not seem to believe that his metaverse room will serve random visitors from the metaverse who, by chance, decide to open a checking account.” “Although the purpose of the room itself seems suspect, the bank’s thinking about the potential opportunities of the metaverse is spot on.”

This is because “the dynamics of supply and demand are driving people into the meta-economy. Over time, the real estate market in the metaverse could evolve similar to the real estate market in the analog world. Over time, the virtual real estate market could begin to see services very similar to those in the physical world, including loans, mortgages and rental agreements.

In fact, “virtual real estate sales are skyrocketing: the two largest virtual worlds – The Sandbox and Decentraland – saw 86,000 virtual property transactions totaling $460 million in sales in 2021.”

FILE PHOTO.  Virtual gallery of Sotheby's auction house.  June, 2021. Decentraland Foundation/Handout via REUTERS
FILE PHOTO. Virtual gallery of Sotheby’s auction house. June, 2021. Decentraland Foundation/Handout via REUTERS

“In both virtual worlds, the average investment in land was about $5,300, but prices have grown considerably, from an average of $100 per land in January 2021 to $15,000 in December 2021, with rapid growth in Q4, when the Sandbox Alpha was released.”

“In the last month, the sale of properties in the six most popular virtual worlds involved more than 52,000 ETH – about 169 million dollars – on the OpenSea NFT trading platform.”

“Metaverse property prices are up 700% in 2021, but it’s not just price gouging that’s driving the surge, it’s the opportunity to monetize virtual land with games, events and other revenue-producing ideas ”.

In this sense, “IBanks have developed a competition to evaluate real estate loans. Smart and enterprising banks will develop the ability to evaluate virtual real estate loans as well. Many of the same principles apply to both types of assets.”

“In the same way that early entrants to the metaverse try to establish their ‘metaverse brand’, early lenders will be able to establish themselves as ‘metaverse lenders,'” said note author Ron Shevlin.

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