Is the bank branch’s reality virtual?

This article first appeared in the March BAI Executive Report. Gain more insights into the value of modern branches as part of omnichannel strategies in that issue, BAI Executive Report: Evolution of Banking Branches.

Imagine going to the bank, but not walking into a physical branch. It might sound impossible, but in banking virtual reality (VR) has the potential to reshape the industry’s long-held traditions and norms.

While still in its nascent stages, VR and other immersive realities—augmented and mixed realities—have the potential to revolutionize how customers interact with banks, offering experiences that transcend traditional banking services.

And yet some VR features harken back to the brick-and-mortar days, such as connecting banking and shopping experiences with an elevator reminiscent of department stores, or pedestrian friendly town centers. VR is an as-yet mostly experimental format that presents opportunities for enhanced customer engagement, personalized financial education and innovative product demonstrations.

To be sure, there are some things that technology can’t outright replace, such as the classic safe deposit box.

To learn more about these transformational beginnings, BAI talked with Teresa Silva Sousa, Portugal-based Banco BPI’s head of innovation and new business, about how the storied industry is being reshaped.

Banco BPI, part of CaixaBank S.A., earned a spot as a finalist in the 2023 BAI Global Innovation Awards for the early inclusion of its banking app, including a VR banking branch, on Meta’s devices.

Some answers have been edited for clarity and length.

BAI: Talk to us about VR in banking. Where are we with this?

Silva Sousa: VR in banking represents a promising frontier in the financial industry that might become a channel of contact with clients and, so, should be explored. However, widespread adoption is still underway, with challenges such as technological limitations, regulatory considerations and customer acceptance needing to be addressed. Nonetheless, as technology continues to evolve and consumer preferences shift, VR holds the promise of reshaping the banking landscape in profound ways, and we, as a bank, want to be ready.

Who is the target customer, and how do they use it?

The target customer of banking in VR comprises individuals seeking innovative and immersive banking experiences, particularly those interested in exploring new technologies and digital solutions.

Banking in the metaverse caters to a diverse audience, including tech-savvy consumers and digital natives who, in the future, will also be met by those seeking convenience and flexibility in their banking interactions. These target customers use BPI VR and banking in the metaverse to access financial services, engage with interactive content, explore virtual banking environments and participate in educational, sporting and recreational activities.

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Users access the elevator just off the lobby in Banco BPI’s VR bank branch. Services can be found throughout the bank’s many virtual floors. Credit: Banco BPI

What role does the metaverse play?

The metaverse can be understood as the convergence of immersive realities, such as VR and augmented reality (AR), with virtual worlds (like Fortnite or Roblox) and the principles of Web 3.0, encompassing blockchain and digital assets. No one knows 100% what the metaverse encompasses, but it will likely be a sort of digital universe where users can interact with each other and with digital content in real time, blurring the lines between physical and digital experiences. It increasingly offers a seamless and interconnected digital environment where people can work, play, socialize and transact, opening up new opportunities for businesses and individuals alike.

The metaverse is not just a concept from science fiction anymore; it is becoming a tangible reality that will revolutionize many aspects of our lives, including banking. Customers will have the opportunity to engage with their finances in entirely new ways, from attending virtual financial literacy workshops to accessing personalized financial advice from virtual assistants to meeting with an account manager. Also, banks might set up the custody of digital assets or engage with clients in worlds such as Roblox or Fortnite.

One floor in our multi-floor branch features wine bottles, essentially explorable advice from a wine expert. You can “escape” further and tour a vineyard. You see with that, how there could be future opportunities for real estate and banking tie-ins, etc.

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Banco BPI’s VR bank branch includes an educational wine ‘tasting’ room. For banking customers, transactional experiences become richer, and for banks, co-branding and customization could open new revenue generation. Credit: Banco BPI

How does this experience compare with entering a bank branch? What are the pluses and minuses?

Banking in VR experiences offers several distinct complements to the experience “in-branch.” Firstly, it provides users with unparalleled convenience and accessibility, allowing them to access banking services from the comfort of their own homes or virtually anywhere with an internet connection. Additionally, VR banking offers a highly immersive and interactive experience, enabling users to engage with their finances in a more engaging and intuitive manner.

Despite the advantages of VR banking, traditional banking branches still offer certain benefits that cannot be replicated in virtual environments. For example, physical branches provide face-to-face interactions with bank staff, offering personalized assistance and advice to customers. Additionally, branches offer a tangible presence in local communities, fostering trust and relationships with customers. Furthermore, branches may offer services such as cash deposits and withdrawals, document notarization and access to safe deposit boxes, which may not be easily replicated in VR experiences.

Overall, while VR banking offers unique advantages in terms of convenience, accessibility and interactivity, it might work, together with apps and web banking, as another piece in an omnichannel banking experience, with traditional banking branches continuing to play a valuable role in providing personalized services and building relationships with customers.

I know that financial literacy plays an important role. Where does that factor in?

One of the rooms in our virtual branch is a portal that gives access literally to the moon. There, users have a financial literacy quiz that focuses on promoting knowledge about key financial topics.

By integrating financial education resources and tools within the VR platform, BPI VR aims to empower users with the knowledge and skills necessary to make informed financial decisions… such as budgeting, saving and investing.

Moreover, we are very proud to say that BPI VR’s financial literacy initiatives extend beyond traditional banking topics to include educational resources on broader societal issues, such as gender equality and diversity. For example, in a virtual stadium created with the Portuguese Football Federation, the co-branded VR platform allows the VR user to play goalkeeper and features educational content related to women’s football, promoting gender equality in sports and beyond.

What type of work goes into developing this experience?

Our journey began with thorough research into VR technology and its potential applications in banking.

We then engaged with VR experts, designers and developers to translate our vision into reality. Internal teams, including innovation, IT and communication, played pivotal roles in providing insights, feedback and support throughout the

development process. Also, our external tech partners—in a first stage Unity and Fracture and, in a second stage, Next Reality—helped us implement what we have dreamed. Together, we navigated challenges, embraced innovation and ultimately delivered a cutting-edge VR banking experience.

How can a bank make actual money in VR?

Monetizing BPI VR involves several avenues, both currently and in the future. Presently, revenue generation can occur through space rental within the virtual branch for brands to showcase and sell their products or services. Additionally, partnerships with external organizations, such as the Portuguese Football Federation, can offer sponsorship opportunities or revenue-sharing arrangements.

Looking ahead, potential monetization strategies include offering premium features or content within the VR experience for a subscription fee. [Platforms] might add targeted advertising, allowing brands to reach a highly engaged audience.

As the technology evolves and user adoption grows, new monetization opportunities may emerge, such as virtual financial services or in-app purchases.

Where do you see VR banking in the next five years?

In the next five years, I see virtual banking becoming increasingly integrated into our everyday lives, offering customers enhanced digital experiences while complementing traditional banking services. As technology continues to evolve, virtual banking will likely play a more significant role in how customers manage their finances, with features such as virtual consultations, interactive financial education and streamlined transactions becoming more commonplace.

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 A VR putting green is just one of several features that play into increasing financial literacy for all ages. Banco BPI also co-developed, with the Portuguese Football Federation, a campaign that shares a stadium experience and teaches financial empowerment. Credit: Banco BPI

What current challenges need to be overcome?

As in any other technology, some challenges are still to be overcome. The first and most important is customer adoption—convincing customers to embrace VR banking experiences may pose a challenge, especially for those who are unfamiliar with the technology or skeptical about its benefits. Banks will need to educate customers about the value proposition of VR banking and show how it can be useful for them.

The second challenge is related to technical limitations, as VR technology still faces limitations in terms of hardware capabilities, such as resolution, processing power and comfort.

Overcoming these limitations will require continued advancements in VR hardware and software development, which might also pose a challenge in terms of costs and investment.

The third challenge is related to security. Banks have the responsibility of addressing any concerns that clients may have about security, privacy or usability. For that, the connection with any banking system needs to be bulletproof in terms of cybersecurity, and compliance with various regulatory standards and data protection laws must be ensured.

The great news is that none of these challenges is impossible to overcome. Providing a seamless and intuitive user experience will drive adoption and investment, and research and development will face technical limitations and security issues. Overall, overcoming these challenges will require collaboration between banks, technology providers, regulators and customers to ensure that VR technology is effectively integrated into the banking ecosystems, delivering value to all stakeholders.

Dawn Wotapka is a contributing writer for BAI.