By Kristianus Jimy Pratama, TFGI Insights Contributor
Metaverse banking (MB) once held bold promises for the future of digital finance, with banks in Southeast Asia, experimenting with virtual branches and gamified interfaces between 2021 and 2023. However, these early efforts largely failed to create real financial value or user engagement, offering little more than traditional banking in a digital shell. Reflecting a broader global trend of tech hype outpacing practical utility, MB’s initial rollout in the region stalled amid unmet expectations.
The first wave of MB in ASEAN was fueled by global excitement around immersive tech and Web3, prompting banks in Indonesia, Singapore, and Malaysia to launch virtual showrooms and gamified platforms. Yet, as user interest plateaued and economic pressures mounted, these projects struggled to deliver real financial value, often replicating traditional banking without offering meaningful innovation. While often positioned as innovative marketing initiatives, MB has faced challenges in becoming a core service. Obstacles include inadequate infrastructure, unclear regulatory frameworks, and a lack of consumer confidence, particularly in countries such as Thailand and the Philippines.
Challenges
The initial struggles of MB closely mirror the challenges faced by Meta’s metaverse ambitions. Both experienced significant investments and widespread hype, yet ultimately failed to deliver lasting user engagement or tangible economic impact. At the heart of this shared issue is a fundamental misstep: a focus on visibility and technology rather than addressing the actual value and purpose for users. In both cases, the technology was seen as the solution, but without clear, real-world applications, the initiatives failed to meet user expectations and prove their long-term viability.
However, this setback should not be viewed as an outright failure, but rather as an opportunity to reset expectations and refocus innovation. As Southeast Asia’s digital ecosystems continue to mature, the critical question is no longer whether MB can succeed, but under what conditions it can truly thrive. Overcoming persistent structural and operational challenges—such as 1) regulatory uncertainty, 2) technological limitations, and 3) infrastructural gaps combined with user misalignment—will be key. With the right regulatory frameworks, technological advancements, and a clearer understanding of user needs, MB has the potential to evolve from a fleeting experiment into a transformative financial service for the region.
1. Regulatory uncertainty
Many MB pilots were launched without clear legal frameworks for digital assets, virtual environments, or financial activities within metaverse platforms. This regulatory ambiguity not only hindered innovation but also discouraged investment, leaving both financial institutions and consumers hesitant. Even in countries like the Philippines and Thailand, where regulatory sandboxes exist, MB struggled due to unclear classifications and licensing requirements for metaverse-based services.
2. Technological limitations
The technological foundation of the initial wave of metaverse banking (MB) in Southeast Asia was underdeveloped. Many platforms operated on fragmented systems that lacked interoperability, scalability, and robust security—essential elements for building trust and delivering seamless digital financial services. Constraints such as limited real-time processing, subpar avatar-based interactions, and weak integration with traditional banking infrastructure resulted in inconsistent user experiences and limited functionality. Moreover, the absence of standardised technical protocols across platforms created operational silos, hindering the emergence of cohesive, cross-platform financial ecosystems. These shortcomings widened the gaps between immersive ambition and technical reality in early MB implementations.
3. Infrastructural gaps
The potential of MB in Southeast Asia is hampered by significant hurdles. Uneven digital infrastructure, particularly outside urban areas, restricts MB’s reach and effectiveness. Connectivity, data privacy, and secure transaction processing issues limit the development of fully functional systems. Consequently, the technological foundation for MB to thrive remains underdeveloped in parts of the region.
Furthermore, early MB services had overlooked the specific needs of everyday users, such as micro-businesses, the unbanked, and those requiring mobile-first solutions. This disconnect between offerings and user expectations led to low adoption rates. Many initial experiences were overly gamified or promotional, lacking practical financial value. Concerns about data security, the stability of virtual currencies, and the absence of services tailored to local needs further contributed to user hesitation. These factors have collectively undermined the impact and potential of MB in the region.
Recommendations
While MB fell short in its early phase, Southeast Asia’s evolving digital finance landscape offers fresh opportunities to reposition MB as a key player in the region’s financial future. By addressing core challenges and aligning innovation with user needs, MB can serve as a platform for inclusive financial services.
ASEAN regulators are beginning to create enabling environments. Indonesia’s POJK No. 3 of 2024, and digital banking licenses in Singapore and Malaysia, signal a willingness to accommodate innovation while safeguarding consumers. Policymakers must now define MB-specific standards, streamline licensing, and embed protections to build trust and encourage investment.
For MB to succeed, it must move beyond replicating traditional banking systems and instead reimagine financial services for the digital age. This means embracing more immersive, AI-driven innovations—such as tokenised lending, decentralised asset management, and dynamic credit scoring based on users’ digital behaviours. These solutions, tailored to Southeast Asia’s digitally native youth, must also be built with strong safeguards to ensure security and transparency.
Ongoing efforts to strengthen digital payments— such as ASEAN’s payment interoperability framework and the development of Central Bank Digital Currencies (CBDCs), lay the groundwork for seamless, real-time financial transactions within the metaverse. These advancements will benefit sectors like migrant workers and small businesses by facilitating smoother, cross-border financial exchanges.
Policymakers and financial institutions have a vital role in clarifying MB definitions, establishing compliance pathways, and ensuring consumer protections. Financial institutions must invest in secure, interoperable digital infrastructure, while MSMEs should be involved in co-designing MB services that address their real-world needs. Additionally, capacity-building initiatives are crucial to improving digital literacy and trust, ensuring inclusive access to digital finance for all.
MB’s early promise may have dimmed, but it is far from extinguished. Its initial shortcomings highlight a broader lesson for digital innovation in Southeast Asia: technology alone is not enough if user needs are unmet. Lasting impact requires the right mix of regulatory clarity, infrastructure readiness, user trust, and meaningful use cases.
As digital ecosystems in the region continue to evolve, there is a clear opportunity to reposition MB not as a novelty, but as a tool for financial inclusion and innovation—particularly for digitally native and underserved communities. With coordinated efforts from regulators, financial institutions, and ecosystem players, MB can still play a transformative role in Southeast Asia’s digital financial future—one that is immersive, inclusive, and deeply attuned to local realities.
About the Writer
Kristianus Jimy Pratama is an Officer Digital Legal & Regulatory of Digital Wholesale Banking Group at PT Bank Mandiri (Persero) Tbk. His work and research had focuses on intersection of emerging technologies, legal issues, regulatory frameworks, and digital financial innovation in Indonesia and the wider ASEAN region.
About the Organisation
PT Bank Mandiri (Persero) Tbk is Indonesia’s largest bank by assets, committed to driving digital transformation across the financial sector. Through innovation, collaboration, and regulatory engagement, Bank Mandiri supports inclusive economic growth and financial access throughout Southeast Asia.
