By Agnelo Marques
The Metaverse unveils a brand-new dimension, a new cosmos where the real world, augmented reality and virtual reality all collide to create a shared, immersive, three-dimensional virtual experience. Cryptocurrency and digital art, namely non-fungible tokens are widely used in Metaverse. People are interested in alternative digital possibilities and ready to uncover new routes to frictionless financial transactions while technocrats, gaming platforms and social media enthusiasts are preoccupied talking about the spectacular experiences one would see in the world of Metaverse.
Looking towards the near future, Metaverse has not only emerged as a favourite among major technology firms but also among the financial sector. Although few have tried it at scale, financial services businesses have joined counterparts from other industries in studying the potential possibility of the Metaverse. Financial institutions have been experimenting the Web3.0 -enabled Metaverse spaces as well as the more conventional Web 2.0 Metaverse and using Web 2.0 technologies to train employees, build virtual “financial cities”, telecommuting hubs, interaction spaces, and provide virtual investment advising services.
The Metaverse is a concept that aims to create an interconnected, digital environment where individuals may interact, exchange money, spend money, and most importantly, combine real and virtual assets. It is now understood that there won’t be a single Metaverse and that no one entity will possess the technology necessary to create every component. The combination of independently developing technologies like AR/VR, Blockchain, geospatial mapping, etc. is known as the “Tech Stack for the Metaverse.”
By virtue of its very existence, we must rethink how we manage our identities, transact, and hold assets. There is a need for interoperability because there are several Metaverses. We are now living by one of the fundamental user-centricity concepts of Web 3.0. In a way, Web 3.0 and the Metaverse go hand in hand; if Web 3.0 is about ownership in a transparent and open world, then the Metaverse is about experiencing Web 3.0 in a much richer way. This indicates that users are in control of their resources, own them, and determine how to use them and with whom to share them. According to this theory, a user might easily transition from one Metaverse to another while still requiring his assets to do the same. Most likely, there will be some kind of Omniverse Bridge, allowing the seamless transition from one Metaverse to the other. Web 3.0 and the Metaverse with their emphasis on interoperability, may very well be able to bring the financial services sector—which still struggles with inclusivity—back to its economic roots in an immersive online setting.
Enhanced Financial Literacy
Financial businesses can improve people’s financial literacy by introducing the idea of gamification and reducing risks by having customers analyse real-world financial decisions by simulating similar events in the Metaverse. Fintech companies can develop software aimed at the younger generation to help them better understand various financial concepts like budgeting, taxation, investing, stock trading, and even buying homes, in an effort to draw in and keep their customer base.
Transparent financial ecosystem
The fact that the Metaverse will not be a single platform and that no one entity (not even Meta) would have total control over a Metaverse participant’s data or experience is another gift from the world of blockchain and the pre-platform Internet, for that matter. This will make the Metaverse more like the early Google years of the Internet rather than the more platform-heavy Internet of the social media era. The brilliance of blockchain technology is that customers can do a transaction that is immediately confirmed, and the entire network is updated in a short span.” A well-functioning, limitless, yet connected Metaverse depends on the immutable, almost real-time validation of ownership of assets or identity that blockchain technology offers.
Moreover, financial services like financing to purchase assets such as real estate or video game skins in the Metaverse might serve as the foundation of early commerce in the Metaverse. For instance, financial firms could provide mortgage services to aid in the purchase of land. They can look after the integrities of purchase such as how to secure the loan, whether would it be sufficient to have custody of the land NFT, how can the cryptocurrency market’s volatility be managed, etc. The Metaverse will also require various types of insurance to guard against loss, much as in the real world. Theft, natural catastrophes, loss/damage/value depletion caused by the smart contract code, and other risk covers peculiar to the Metaverse would all require insurance.
The Metaverse is where virtual worlds will finally supersede the physical world. Every aspect of our existence is being transformed into bits and bytes by the fast advance of digitalization, which is changing our environments, our lives, and even our very unique identities. Financial companies have traditionally followed their clients’ banking needs from branch banking to online banking to mobile devices. It is anticipated that there will be a large increase in the number of business transactions as more sectors move toward the Metaverse. According to estimates, the worldwide Metaverse market is estimated to grow to $100.27 billion in 2022 from $1.527.55 billion in 2029.
Given its strong foundation in asset digitalization, cryptocurrency, regulatory compliance, AI applications, and blockchain adoption, fintech is best suited with its current capabilities to grow into a platform that can embody this vision. While Banks, FinTechs, and insurance firms are among the financial institutions that are anticipated to gradually enter the Metaverse, they will surely witness a wave of transformation.
(The author Agnelo Marques is the Principal & Head of Blockchain CoE, Mphasis. Views expressed are the author’s own.)