Metavers: A Brave New World Takes Shape

By Radhika Saigal

A futuristic technology ecosystem that thrives on the convergence of physical, augmented, and virtual shared spaces has now become a reality with the Metaverse. It not only allows users to buy and sell virtual assets, but also drives technologies such as Virtual Reality (VR) and Augmented Reality (AR) to facilitate transactions in a fully virtual environment.

More and more consumers across multiple industries are buying virtual assets with real currency in the form of non-fungible tokens (NFTs). So what does the future look like? Goldman Sachs has estimated that 33% of the digital economy will move to the metaverse and this will facilitate market expansion by 25%, while Gartner predicts that by 2026, 25% of people will spend at least an hour a day in the metaverse for work, shopping, education, social and/or entertainment.

Metaverse real estate prices are up 700% in 2021, but it’s not just price speculation that’s driving the increase, it’s the opportunity to monetize virtual land with games, events and other revenue generating ideas. Financial services companies are preparing to provide the financial support required for transactions in the metaverse. The metaverse represents opportunities for banks to insure and lend against cryptocurrency, NFTs, and virtual real estate. Digital lending start-ups, venture capitalists and private equity firms are the first to jump on the bandwagon, launching their own metaverse or crypto and blockchain-based platforms, granting loans mortgages against virtual real estate, etc.

Banks are exploring the possibilities of providing traditional banking services in the 3D world, seeking to virtualize familiar customer interactions like cash withdrawals and more. Banks can identify potential customers, onboard them through crypto wallets, and provide payment, lending, and custody services.

Metaverse transactions require improved financial infrastructure. Blockchain-facilitated cryptocurrency is going to be the financial backbone for metaverse transactions that will be facilitated by smart contracts. Over the past two years, blockchain technology, especially with the advent of Web3, has given birth to a whole new economy, borderless, secure, fast, decentralized (without intermediaries). At its core, the Metaverse is built on the foundation of immersive and decentralized technologies.

Most global banks already offer digital asset/exchange/custody platforms that can be extended to meet the demands of the virtual world. Banks can consider developing their own virtual world platforms, enabling new products and even marketplaces and linking them to traditional infrastructure.

Whether they are ready or not, traditional financial services will have to rise to the opportunities and challenges posed by the new internet-based free market economy. To make the most of the endless opportunities that Metaverse presents, it will be crucial for banks and financial institutions to focus on building technology proficiency around Blockchain, AR/VR, embracing a culture of disruptive innovation, being truly agile with front to back integrated teams and finally co-creating responsibly by leveraging connections and partnerships rather than building on your own.

(Writer is partner – Tech Consulting, EY)

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