Managing banking crises with the Metaverse
The interaction between markets is now so intertwined that a break in one link in the chain can shake the whole chain. The 2023 banking crisis also has big problems behind it. But can smart solutions prevent the banking sector’s woes?
The process that started with the bankruptcy of Silicon Valley Bank (SVB) continues. Silicon Valley Bank, which was closed by the Federal Deposit Insurance Corporation (FDIC), the US’s SDIF, was the 16th largest bank in the country. The bank’s bankruptcy is the second largest in US history after Lehman Brothers, which failed in the 2008 crisis.
Then, the agency also appointed a trustee to Signature Bank to protect depositors. On the other hand, concerns over the problems experienced by Credit Suisse Group continue. The banking sector is constantly undergoing innovations and changes with technological developments. However, rapid adaptation to new products and unresolved risks in the sector can also lead to bubble formations and crises.
Investors’ new favorite: What is Metaverse and Metaverse Coins?
With the integration of new technologies such as smart solutions and metaverse into the banking sector, it is a matter of curiosity about what kind of banking system we will encounter in the future. However, recent bank failures show the need to focus on smart solutions.
THE INEVITABLE EVOLUTION OF BANKING
The banking sector has a history as old as human history. It is the embodiment of the saying that money circulates with money. Today, the banking industry is more complex than ever. Banking, which is included in financial enterprises, is an Italian word derived from the concept of banko, which has been continuing continuity since 3500 BC to the present day.
The first bank, called “maket”, was established in 3500 BC by the Sumerians. The first bank in the modern sense was established in Venice in 1587 under the name Banco di Rialto. In this period, the modern banking system was shaped by the increase in trade, the development of financial instruments and the spread of banking activities. The power of money has always existed and the banking sector has existed to manage this power.
THE ERA OF SMART SOLUTIONS
Smart solutions are an important development for the banking sector. These technologies cover areas such as artificial intelligence, machine learning and robotic process automation. Intelligent solutions improve the customer experience while also increasing transaction efficiency. For example, many banks now serve their customers with chatbots, increasing customer satisfaction. Complex transactions are being handed over to the ease of artificial intelligence.
Metaverse: From traditional finance to virtual finance
BUZZWORD METAVERSE
Metaverse banking makes it easier and faster for customers to conduct financial transactions. Virtual bank branches, 24/7 service, and eliminated geographical limitations, to name a few… Metaverse banking also makes customers’ financial transactions more secure.
In the virtual world, authentication and security measures become stronger and fraud risks are reduced. Of course, it is not without its risks. The entry of new players into the banking sector, the misuse or theft of data, and the use of new products and services without a full understanding of them can have unintended consequences.
FUTURE PERSPECTIVE
The banking sector is undergoing a major change and transformation in line with technological developments. Business models are changing. While traditional banking business models were product- and service-oriented instead of customer-oriented, the digital transformation has brought customer-oriented, innovative, digital banking business models to the forefront.
Smart solutions and metaverse technologies are among the technologies that will carry the banking sector into the future. However, the use of these technologies also brings some risks. Technological transformation in the banking sector not only makes life easier for customers, but also brings with it the risks of the virtual world.
SIGNIFICANT AMOUNTS OF MONEY LOST IN TECHNOLOGICAL FINANCIAL CRISES
The significant amounts of money lost in technological financial crises can often be large-scale and billions of dollars. Here are some of the major technological financial crises of recent years and the amounts of money lost in these crises:
2000 Dotcom Bubble: In 2000, the dotcom bubble, which started with the over-inflation of internet companies’ stocks, burst in 2002. In this crisis, investors lost 5 trillion dollars in internet company stocks.
2008 Mortgage Crisis: The 2008 mortgage crisis was triggered by excessive lending practices in the US mortgage market. In this crisis, financial institutions around the world lost a total of $15 trillion.
2011 MF Global Crisis: MF Global, a US-based brokerage firm, mistakenly mixed client funds with company funds and went bankrupt. In this crisis, a total of 1.6 billion dollars of clients’ funds were lost.
2013 Bitcoin Crash: In 2013, the extreme rise in Bitcoin prices caused a bubble to burst. In this crisis, Bitcoin investors lost a total of $3.5 billion.
2020 COVID-19 Crisis: The COVID-19 pandemic caused a major crisis in the world economy. In this crisis, billions of dollars were lost due to the collapse of many sectors. Among technology companies, the stocks of companies operating in the travel and tourism sectors lost a great deal of value.
Decentralized financial system: “DeFi”
HOW DOES METAVERSE OFFER A SOLUTION TO CRISES IN THE BANKING SYSTEM?
Banking systems have been subject to crises many times in history and these crises can threaten financial stability. Metaverse can offer potential solutions to overcome such crises. Here are the potential benefits of Metaverse for banking systems:
- Metaverse can help eliminate intermediaries in banking systems through technologies such as decentralized finance (DeFi). This reduces the control of banks and financial institutions and makes the financial system more secure and transparent.
- It can help automate and verify financial transactions with smart contracts. This helps reduce human errors and the risk of fraud.
- Metaverse ensures the security of financial data thanks to blockchain technology. This provides a higher resistance to hacking and prevents financial data from being stolen or altered.
- It allows financial transactions to be carried out quickly. It facilitates access to the financial system for everyone worldwide. Reduces the costs of financial transactions. It provides an opportunity to prepare for future financial crises. This makes the financial system more resilient and reduces the impact of crises.
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