Once upon a time, there was just reality. Now we have virtual reality, extended reality and augmented reality as well. And within these new dimensions of reality is the metaverse.
Defining the metaverse is not a straightforward endeavor. The New York Times has called it “a fully realized digital world that exists beyond the one in which we live.” Wired magazine takes a somewhat simpler approach, saying a good rule of thumb is to sub in “metaverse” when you might otherwise use the word “cyberspace.” And Mark Zuckerberg, who swapped out Facebook for Meta as his company’s name, suggests that the metaverse may not be a place at all, but rather a point in time.
But however you define it, the metaverse is not yet ready for prime time for the banking industry, though some curious institutions are tiptoeing in and poking around. This early prospecting makes sense, given that what today is largely a gaming playground is pegged by some as being a $1 trillion opportunity for financial services providers.
BAI recently spoke with Sandeep Vishnu, a partner with the global consulting firm Capco, about what the metaverse is and how banking institutions might venture into it.
The interview has been edited for length and clarity.
With such a range of definitions for the metaverse, it’s no wonder people are a little confused. How do you define it?
Think about the metaverse as being a new interaction and engagement model for us in society. It’s going to augment how we interact with each other, it’s going to substitute, it’s going to enhance. We don’t know yet how it’s going to manifest itself, but regardless of how it emerges, it’s going to be enhanced and augmented in a different interaction model for us.
What is today’s opportunity for banks in the metaverse?
I think the current opportunities for banks fall into two broad categories. One, in building out the metaverse. This is where they can offer lending support to companies that are investing in technologies to build out the structure. It’s where they can offer support in building out platforms. The second set of opportunities is in transactions. Today, the greatest number of transactions happen in gaming, but tomorrow they could easily happen in real estate, art or tourism. Banks provide the mechanism for these transactions, and they inject trust into the system.
Aside from transactions, what else are banks doing now to step into the metaverse, or at least to get ready to take that step?
Some banks are enabling transfer of money from the real world to the metaverse and vice versa. We are seeing that some advisors are advising their clients on how to invest into the metaverse. There are others that are trying to capture space in it by creating a landing zone and a platform. We’ve had the emergence of Sandbox, of Decentraland, where people can come, aggregate, interact and then hopefully drive transactions.
Big tech players like Apple and Google are getting more into financial services. Is the metaverse an avenue for them to expand their appeal to traditional banking customers, particularly younger ones?
This is definitely an area where you will find new entrants from the technology world. Today they’re doing it through the ability to influence payments, but it could then move into lending or investments. But I think that’s a little ways away. There’s a lot of opportunity for technology companies to capitalize on building out the metaverse versus trying to actually interact and capture the value driven through transactions.
For banking institutions that do want to venture into the metaverse, is there a right way to do it?
I think the metaverse for a bank should be very much part of the overall consumer strategy. If you are a bank with a consumer base that’s less tech-savvy, you might want to be a little careful in how much you try to go after this market because it may be hard to convert your current consumers and attract new ones. Some of the digital banks that emerged over the past 10 years could probably go into the metaverse more easily because they can take their customers with them.
Knowing that both banks and the metaverse will continue to evolve, give us a vision of how you think banks might fit into the far-future metaverse.
For those who are familiar with “Star Trek,” consider the concept of a holodeck. A holodeck was a virtual world that got created in a very limited space. It provided the same types of interactions that existed in the real world, but it augmented them. I’m not saying that’s all that the metaverse is going to be, but it could be a way it evolves. Banks need to capitalize on that. They are the financial glue that allows us to interact with each other, to trade, to exchange, to buy, to sell, to invest. These are things that banks do in the real world today. Tomorrow, they need to offer it in the metaverse.
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