Pulling the Plug On Banking In Second Life

A little while back, I blogged about the financial services community in the virtual world of Second Life, the brainchild of Linden Lab. These banks and brokers deal in Linden Dollars, which is the money of Second Life. According to wikipedia, although the exchange rate between real dollars and Lindens does fluctuate, there are approximately 270 Lindens to one U.S. dollar.Many questioned the viability (and legality) of the financial services providers operating there. Second Life has come under fire for allowing firms with somewhat questionable business practices to set up shop in the cyber world. There was talk about regulators stepping and now it looks like things have finally come to a head. According to an article on Techcrunch, "Linden Lab has announced that virtual banking within Second Life is to be banned effective January 22 after receiving multiple complaints by Second Life residents scammed by bank operators." (I especially enjoyed the comments left at the bottom of the article by some of the readers of the Techcrunch piece.)

In light of these developments, there has been a run on the remaining banks in Second Life as customers rush to get their money back.

Although this news doesn't directly relate to bank technology, it does deal with banks in a technology-based virtual world. It brings to mind the Web 2.0 issue and how financial institutions can exploit this new concept. There are some "real" banks with branches on Second Life. However, they took the more cautious (and probably smarter) route and have just stuck to creating a community/affinity destination in the virtual world. However, if they did decide to offer real transaction services in Second Life, I imagine the result wouldn't been quite as disastrous. Accountability is so important in financial services. I think the Second Life example just drives home this notion. These so-called banks might have thought they were immune to acceptable banking practices just because they existed outside the real world. Obviously, cyberspace is a poor shield for shady business. There will always be scammers online, but it's good to know that at least some of them are getting their just desserts.

But don't blame the banks entirely. You'd think people would be a bit more sensible about where they put their money, virtual or not.