Fintech in the Metaverse: Exploring the Possibilities 

Metaverse: It’s a term that has earned a great deal of attention in the past year. In 2021, the hype cycle surrounding the Metaverse concept accelerated as two corporate events upended the space. First, Facebook emerged as a key early adopter, pivoting entirely to the Metaverse and rebranding their company as Meta. Second, the successful IPO of Roblox – creators of a highly engaging virtual gaming world – catapulted its valuation from a privately held firm of $4B to a publicly-traded firm valued today at $40B. 

Because we believe Metaverse has potential we can’t even predict yet, GlobalLogic is investing significant energy in our understanding of the impact of the Metaverse across several industries, including retail, finance, healthcare, media, and automotive.   

One particular area of interest is fintech, where the immersive Metaverse environment is poised to erupt with new opportunities.

Given fintech’s incorporation of blockchain and non-fungible token (NFT) technologies, we believe the Metaverse environment will prove a hotbed of innovation. The level of VR penetration in our daily lives is still an open question and perhaps generationally dependent. Even so, the opportunity for fintech in the Metaverse is more than mere speculation. The virtual goods market is already estimated at close to $100 billion annually, and about $50 billion in real-world and cyber assets are traded using cryptocurrencies every day. 

Metaverse: Hype or Future Business Potential?

Combining immersive online experiences with ownership and exchange models that persist worldwide will yield unprecedented opportunities for fintech in this immersive new virtual world. Virtual real estate transactions, convertible investments, markets for exchanging goods and services – the possibilities are endless.

To validate our hypothesis and further strengthen our insights on future impacts in fintech, Dr. Jim Walsh, CTO at GlobalLogic, hosted a dinner in New York at Columbia University, in partnership with the Global CIO Institute, to discuss Metaverse benefits for businesses. The audience of CTOs, CIOs, Chief Product Officers, and even a head of Financial Crimes Compliance from across the BFS and fintech industries joined in the boardroom-style discussion and lent a fresh perspective. 

Our hypothesis was validated, but one question persisted: What is the right strategy for our business?

Unless you’re a hard-core gamer, there are precious few reasons for a mainstream, non-technical person to visit the Metaverse. However, like emerging technologies before it, this space and the potential it offers has only just begun to reveal itself.

Is the Metaverse the Next-Gen Internet?

To contextualize the Metaverse and its potential, we can look back at the evolution of the World Wide Web. When it was first introduced to the public in the early 1990s, there wasn’t much to see, maybe a few hundred websites. At the time, detractors said the Web was a gimmick; that all it did was provide a better user experience (UX). Much of the information and content it contained was already available online via bulletin boards, FTP sites, FAX-back systems, and other platforms. Thankfully, time has proven that UX plays a more critical role than those early detractors imagined.

Recommended reading: 5 UX Connected Products Management Tips [Blog]

Let’s consider Apple’s belief in UX. Apple’s ‘WebObjects’ was one of the initial applications that supported content authored through the web (what’s now called Web 2.0). At the time, content authored through the web was seen as only a minor improvement over static websites. However, companies such as Twitter, Facebook, and many others have proven that this ‘minor’ improvement in the experience has a significant impact on e-commerce, social interactions, and other areas.

Apple further cemented its legend as a UX leader when it first shipped the iPhone in 2007, then the iPad in 2010. While the potential extensibility of each platform through apps was exciting, each product was initially seen mostly as improving the experience of already-existing smart devices. It took time for the world to recognize the game-changing nature of this combination of ease of use and extensibility. 

We are seeing something quite similar today in the Metaverse adoption cycle. 

The immersive experience, while remarkable, is immature. Having to wear large, goggle-like devices on your head means few of us (even gamers) visit the Metaverse from outside of our own homes. Even at home, we probably don’t wear our VR goggles around the house, using them only in the rooms where we play games or watch entertainment.

VR headsets are not “turn back” devices like smartphones. We wouldn’t turn the car around to go home and retrieve the headset if we forgot it. But you bet you would if you left home without that smartphone!

Because an improved customer experience drives innovation, and innovation creates business, the Metaverse has the potential to be a game-changer – just like the Web and smartphones before it. The potential and opportunities will differ, of course. But the impact they’ll have on consumers and the companies who do business with them will be immense.

Yes, Metaverse is an Enhanced UX… And Much, Much More

In the early phases of the Web, Web 2.0, and smart devices, when critics said, “It’s just a better user experience,” they missed the point. When you make a system easier to use, more people will use it. As it attracts new users, people will also find creative things to do with this new technology – things you hadn’t considered. This innovation and evolution drive new revenue streams and even greater adoption.

The key power of VR is that it lets you create new worlds and interact in rich ways with others in a shared, virtual context. 

The Metaverse builds on the notion of this immersive virtual world, adding concepts of ownership and the persistence of objects. 

These ideals are coming to fruition in the contexts of non-fungible tokens (NFTs) and blockchain technology. Their evolution – alongside that of VR itself – will continue to transform the space in the future.  

Recommended reading: Tokenomics with Blockchain [Whitepaper]

The bottom line is that the Metaverse’s virtual reality has important features of physical reality – particularly the ability to create and exchange items of value between users. And as those items persist over time, a foundation for commerce will evolve, creating opportunities for new financial technologies and the fintech space as a whole. 

With the ability to create, sell and develop virtual real estate, for example, we open the door to concepts such as mortgages and leases, rentals, interest payments, and more, all based on virtual assets. Investment and speculation in persistent virtual items of value, including artwork and other intellectual property, are already happening. We already have access through individual sites and apps to e-commerce for designing, clothing and equipping my avatar, and decorating my virtual house or office cubicle, for example. 

The expansion and maturation of the Metaverse will see these virtual possessions become portable and reusable across future sites and apps. The exchange of currencies across virtual and physical reality already happens; in fact, the purchase of virtual goods approaches $100B USD annually in physical money.

Key FinTech Leadership Talking Points on the Metaverse Opportunity

Currently, there are no obvious killer applications for the Metaverse, and no one knows when or how they will evolve. One thing everyone agrees on is this: they do not want to be caught flat-footed. 

During the boardroom dinner discussion, attendant Fintech company leaders shared their thoughts on the emergence of the Metaverse and key areas they must consider as they formulate their own game plans. Here are their top priorities: 

The time to lay the foundation for Metaverse culture is now.

Most early Metaverse users will probably be Generations Z and Alpha (in their 20s or younger). To attract these users, companies must create engaging experiences that grab and hold their attention. Persuading this group to ‘invest’ in virtual assets, and to insure and trade them, requires the development of a foundational Metaverse culture. Trying to impose physical-world constructs on the Metaverse may or may not work. For example, a Metaverse ATM might be a good idea by offering a familiar metaphor for deposits, withdrawals, and currency exchanges. However, a virtual insurance broker might not go over as well (or vice versa).

Plan for scarce talent and resources. 

Skilled resources will be in short supply and hot demand, so companies must be thoughtful about acquiring and developing the required skill sets or identify partners who can help. Predictably, as the Metaverse takes off, designers and engineers skilled in the Metaverse technologies and culture will be in high demand and short supply. This happened for Web 1.0, Web 2.0, and the initial phases of the smartphone revolution, as well.

Examine your new products and services with a Metaverse lens.

Innovators must think outside the box about the new products and services the Metaverse will demand and enable. While it was evident from the outset of Web 2.0 that even non-technical end users could now remotely author web content, few of us thought there would be 600 million blogs worldwide and 31 million active bloggers in the US alone. Picture-, video-, and voice-oriented remotely authored, interactive sites such as Instagram and TikTok have over a billion users each!

Prepare to work through being an outlier in your organization.

Anticipate that your new sources of revenue using emerging technologies will start out small and may come under pressure in your company. Be ready. ‘Simple’ things like accepting micropayments or handling virtual transactions may cause a backlash. Because no one knows if and when this technology will catch on, you must either be comfortable taking the risk ahead of the curve, have a plan to catch up with your own technology, or wait until the Metaverse is established and acquire a successful player – probably at a very high valuation.

How will virtual experiences coexist alongside – and even complement – traditional ones?

If you are a current bank or insurance provider, be ready to support a dual business model, and pay attention to the emerging competition. Don’t underestimate the impact on banks in terms of launching virtual or “banks of the future” in the Metaverse. Insurance companies could open virtual brokerages to help people choose the right policies, for example. Ensure your strategy incorporates how you will support digital currencies. Speculation in virtual ‘equities,’ art, and ‘items of value’ and currency arbitrage will certainly see cycles of boom and bust – just like we see in the real world. Have a plan for cryptocurrencies (and even some of the more esoteric currencies of the Metaverse, such as Robux) that could be transacted through the banks or Metaverse ATMs. Be ready to embrace this experience while preserving the traditional models, as well.

Stay agile for first-mover advantages as opportunities arise.

Pay attention to emerging business models as they are unveiled. Paper-driven processes such as KYC (know your customer) or FNOL (first notice of loss) could be transformed through the Metaverse. With 2D technologies, these processes are best at capturing some elements of the real world; with 3D technologies, these could leapfrog a financial institution in its ability to interact – especially with its younger customers. 

Dip a Toe in the Fintech Metaverse Today to Step Confidently Forward Tomorrow

There will be new ways for financial institutions to make money in the Metaverse. This could involve the elements we have outlined already, such as taking out credit to finance the purchase of art, mortgages for virtual real estate, or insurance on virtual goods. Or, it could be something we haven’t even imagined yet.  

If history repeats itself, the winners in the Metaverse will be those who emerge with user experiences and products that seemed surreal just a few short years ago.

This is the time to familiarize yourself with the space, the current players, and the technologies enabling exceptional virtual experiences today. How the Metaverse will evolve and precisely what that means for fintech companies remains to be seen. What we know for certain is this: consumers are moving into a new space, and those companies that transition alongside them will be best positioned to meet their needs in the future. 

Will yours be one of them? 

Learn More:

• Metaverse: Reimagining the World in a New Way [Whitepaper]
• Mastering the Three Fundamentals of Omni-CX [Blog]
• Metaverse: a battle of seen and unforeseen forces, by V. Padmanabhan, Senior Vice President – Engineering, GlobalLogic