What is the ‘Metaverse’?
Ever since Facebook rebranded itself as Meta in the fall of 2021, the term ‘Metaverse’ has become a buzzword. Much like the ‘dotcom’ boom in the late 90s, every business vertical now finds itself facing the ‘Metaverse Challenge’.
Even if we are still not all clear about just what the Metaverse is, we hear passionate voices echo the sentiment that it will be the next major Digital Milestone and transform the internet from a two-dimensional experience to a multi-dimensional one, affecting as it does every facet of our lives, including business.
What we do know for now is that the Metaverse is seen as an interconnected collective virtual landscape that uses a potent combination of Virtual Reality (VR), Augmented Reality (AR), and Extended Reality (XR) to provide users with an immersive experience that links the digital world with the real world.
Much like the internet (World Wide Web), the scope and reach of the Metaverse are expected to be global, but where the Metaverse goes one step further is that enabled by Digital Currencies, Crypto Currencies, and Non-Fungible Tokens (NFTs), it enables a completely independent Virtual Economy. This is also why the Banking and Financial Industry is taking very serious note of the ongoing developments in this space.
One of the imminent challenges for the entire Financial Services sector will be to bring in rapid innovation in Financial Technology (FinTech) and bridge the gap between online and offline Financial Experiences. Already, the lines between ‘real’ and ‘virtual’ assets are starting to blur.
How big will the Metaverse become?
In March of 2022, Citibank published a paper titled Metaverse and Money: Decrypting the Future, which predicts that going forward, we will be able to collectively access an ‘Open Metaverse’ Community – much like the internet that will include everything from Art, Commerce, Media, Advertising, Healthcare and Education and one that will be accessible via personal computers, gaming consoles, smartphones, and VR headsets.
The article also estimates that the Total Addressable Market (TAM) for the Metaverse could be anywhere between $ 8 and 13 trillion by 2030. Much like the Internet, the Metaverse is also expected to involve up to 5 billion out of a global population of over 8 billion active users. However, where the Internet Revolution was mainly fueled by Data, the Metaverse Revolution will be fueled by creativity.
Rise of the Creative Economy
The origins of the Metaverse lie in the gaming industry as it was within the hypercompetitive world of online gaming that we first experienced ‘Virtual Worlds’ where one could enter and perform complex tasks – some of which could be linked to real-world economic transactions as well. While today, the Metaverse is no longer linked purely to the gaming industry, the key to the progressive development of the Metaverse is very closely linked to creativity.
Unlike the internet, which functions primarily as a repository of information designed to make our ‘offline’ lives easier, the Metaverse is designed to help us make a transition completely into the online world. This is where the term Creative Economy has evolved from simply referring to creative industries to today encompassing creativity throughout the economic system.
However, a world the pillars of which are based on creativity will force a complete rethink of both Technology and Finance as it will by its very nature expand the process, objects, and subjects of all financial transactions.
How will the Metaverse impact Financial Services?
One of the most exciting aspects of the Metaverse is the immense growth it promises for the world of Banking and Financial Services. In the not-too-distant future, Financial Services will be the principal catalyst bridging real-world assets to those in the virtual world. This will require an aggressive and ‘Future-Forward’ mindset, designed to match the requirements of the growing Creative Economy.
Business entities working in Financial Services will need to urgently develop Digital Competencies
The world of Banking and Finance is one of the oldest sectors in the world and yet, traditionally, it has been slow to respond to changes. Less than 2 decades ago, when the internet was changing business as we knew it, there was a ‘Luddite’ resistance from the Finance and Banking World to adapt to these developments.
Today, however, globalization is synonymous with online commercial/financial activity and the last 10 years have seen a scarcely believable explosion of eCommerce.
Likewise, Web 3.0 and the Metaverse are poised to pose the next major challenge to the Financial Services sector, and this time, it is imperative that businesses operating in this space embrace the change before it engulfs them in turn.
Customer expectations are poised to change at all times.
While the Internet runs on Data, the Metaverse is fueled by creativity. Already if current trends are any indication, customer expectations are starting to change, as we increasingly step away from traditional economic systems and into creative economic systems. Businesses operating in the Financial Sector will have to stay alert and abreast of these changing expectations and work proactively to expand their Digital Solutions.
Blockchain and NFT based transactions will redefine the boundaries surrounding legality.
A huge part of the Creative Economy is Blockchain and NFTs. These ‘virtual assets’ typically fall outside the ambit of traditional financial and legal structures and as such businesses operating in the Financial Services space will have to restructure a lot of their core definitions to accommodate their new realities. In some cases, this could very well mean a 180-degree reversal on traditional ‘bedrock’ Financial Policies.