The impact of the Metaverse on financial services
By Matthew Williamson, VP of Global Financial Services, Mobiquity
Defining the Metaverse
Prior to discussing the Metaverse’s potential to permeate traditional sectors including finance, one must first establish a basic understanding of what the Metaverse is. The Metaverse can be understood as an innovative way for people to interact with emerging technologies, including but not limited to virtual reality (VR) and augmented reality (AR). These evolving concepts have led to the creation of a digital economy, known as the Metaverse, where goods can be created and acquired virtually.
Dehyping to generate business impact
There has been much buzz surrounding the Metaverse’s implications on several industries. Though originally thought to pertain primarily to gaming and social media, Metaverse technologies, including VR and AR, have found practical applications among traditional sectors, such as finance. Before exploring these implications, however, there are several questions to address. Firstly, will the Metaverse enhance existing customer experiences where it is implemented, or will it lead to the creation of new ones? Will it be swiftly adopted by customers, or will its imposition cause frictions? Has market research been conducted to ascertain this? Finally, considering that the imposition of more technology is not always the answer, can the Metaverse’s impact on business outcomes be quantified compared to existing technological infrastructure?
Practical applications in financial services
Among practical applications provided by the Metaverse, its ability to create virtual environments for people to connect may severely impact the financial industry. The employment of VR and AR during COVID-19 and remote work conditions enabled greater collaboration in teleconferencing where professionals used annotating, chatting and screen-sharing features, allowing them to work efficiently while not in the same physical space.
VR and AR can also be used by financiers in individual capacities, particularly with data visualisation, aiding them in analysing financial risks, providing more precise services to customers. This raises the bar on their expectations, stimulating competition and innovation in the market.
Moreover, virtual environments can be used in consumer-oriented manners. The creation of digital shopping environments in the Metaverse acts as a hub for companies to reach a wider range of consumers without geographical constraints, allowing for greater exposure. Such virtual shopping hubs can employ digital payment means so that transactions take place entirely within the realm of the Metaverse.
Through digital means, financial advisors can provision for greater convenience, signifying a shift in the industry, and broadening the scope of the services clients can be provided with, such as AR being used to simulate different financial scenarios so that customers can visualise them with ease. With the progression of the Metaverse in finance and banking, the next developments could see the creation of fully-digital bank branches, diminishing or perhaps eliminating the need for physical ones. Such client-centric developments can either build upon existing consumer experiences or create entirely new ones.
A main attractive feature of using VR or AR, in any of the aforementioned examples, is the ability to superimpose a wider range of information digitally, which mobile devices or computer screens would not accommodate. Thereby, complementing existing mobile banking apparatus, such as apps that showcase customers’ account balances or direct them to the nearest bank branches using AR.
However, perhaps the Metaverse’s greatest asset, particularly in client-facing contexts, is the ability to integrate human touchpoints through digital means. By aiding the creation of new forms of human interaction, the public will likely be more willing to adapt to the Metaverse in different commercial transactions and communications, such as financial advisory, as this adds an element of trust to consumers that would otherwise be sceptical of such technological redesigns.
The future: An engine for growth
Beyond being a platform through which data can be hosted and reproduced, the Metaverse is quickly leading to the creation of a new economy, involving trade in intangible products such as non-fungible tokens (NFTs) in the realm of art and fashion, as well as virtual travel, events and real estate. The monetisation of the Metaverse is growing rapidly, with millions of dollars being injected into virtual experiences only accessible through cyberspace. This leads to the creation of jobs within the Metaverse, with greater investment and other underlying financial transactions shaping the financial industry as a whole.
There is an ongoing debate about whether the Metaverse economy should function as a closed system, piloted by Big Tech, or an open one, with greater reliance on blockchain technology. Margrethe Vestager, the EU’s Digital Competition commissioner, has stated that plans to craft a comprehensive virtual reality environment will be the latest challenge for antitrust regulators.
Open banking, a development in financial services which has empowered market competition, much like Metaverse expansions, can be tied into the open vs closed system debate, under the idea that different financial institutions can collaborate to bring about a wider range of services for consumers, leading to greater shifts in the industry.
The Metaverse is, above all, an environment in which people can interact with new technologies, and the providers of those technologies can interact with each other – creating new ways of engaging with customers, redesigning consumers’ experiences. The current transition into the Metaverse, both from a technological and experience perspective, benefits from taking a collaborative approach, and appealing to the Metaverse’s interoperable nature. As such, firms such as financial services providers will be able to diversify across different sectors, broadening the scope of the digital technologies available to them, and what they can provide to their customers. With the Metaverse allowing space for established brands and newcomers, collaboration can lead to revenue streams and growth across the board.
Fundamentally, banks and financial institutions’ success in using the Metaverse will be determined by their implementation. Across all industries, the Metaverse alone does not guarantee an improved customer experience. A strategic approach is essential in analysing how and if the Metaverse will drive business impact and eliminate frictions in the customer journey, rather than creating new ones. This can be achieved by focusing on human touchpoints within the digitised experience, to provide personalised services and give consumers a sense of trustworthiness.
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