The open road to the metaverse

July 25, 2022 10:07
Image: Reuters

The metaverse is open for business, and financial services have a role to play. How can payments providers and their technology partners help create more open, and more secure, virtual environments – and what’s in it for them?

he level of attention that the metaverse is attracting, is skyrocketing, with both companies and individuals vying for virtual real estate. On our shores, one of the region’s largest real estate companies is hosting experiential retail offerings in Decentraland ; a hospitality group is opening a hotel in the same virtual world ; and a graduate school is planning to start a metaverse campus.

But we are only at the very beginning of understanding the short-term opportunities, long term potential and risks along the way in the development of the metaverse. Even though we call it the metaverse, it is not a single concept or vision, but a constantly growing, potentially infinite number of separate virtual reality worlds, designed variously for entertainment, commerce and social networking, often in combination. In the right hands, the metaverse is not only a place to experiment and experience alternative realities, but to better understand our own.
The big bang for banking experiences

Both Goldman Sachs and Morgan Stanley have separately called the metaverse an $8 trillion opportunity, while Bank of America sees it as a trigger for the wider, more lucrative use of cryptocurrencies. Locally, DBS Bank is planning to introduce its banking services to the metaverse. From a banking and fintech perspective, the metaverse is not only a new realm of experience, play and commerce but also of payments and financial services. Consequently, as the concept of the metaverse becomes a reality, its pioneers are looking at how to create – and monetize – their leadership position.

Much in the same way mobile banking has changed our expectations of financial engagement, banks and fintechs will need to reimagine banking and payments in the metaverse. For example, while we expect payments to be an integral and seamless part of eCommerce today, the metaverse could enable a more tailored, personalized, and potentially inclusive domain in which to deliver financial services for both the real and virtual world.

Open opportunities vs. proprietary worlds

One of the challenges for banks and fintechs – and their customers – today, is that most metaverses operate using proprietary digital currencies, wallets, and micro-economies. However, as metaverses mature and users live in more than one virtual world, they need to be able to transfer wallets between worlds.

This requires an open-source approach akin to open banking. Plans are already underway to achieve this. Outlier Ventures, Europe’s first venture capital firm dedicated to blockchain, is currently working on an open metaverse operating system, while the Open Metaverse Interoperability Group is looking to make the metaverse an open and interoperable resource – a new internet that developers can build together. Metaverse pioneers are likely to be reluctant to support an open virtual space in which competitors can co-exist; however, a potential middle ground could be a marketplace or app store-type approach, in which one firm owns the environment but permits third parties to participate.

Financial services will shape the topology of the metaverse

The metaverse is still in its infancy, and the risks and opportunities remain largely unknown; however, I can think of three positive ways the industry might use its powers to help shape the metaverse, make it a safer place to operate, and drive freer movement from one parallel metaverse to another.

1) Embed financial services. Payments and banking services need to exist as part of the metaverse, but they also need to be so seamlessly embedded that they become virtually invisible. Imagine a virtual concert. Attendees could pay for tickets, buy a t-shirt for their virtual avatar and purchase an NFT of the performance to revisit later. To do this, they require instant access to a digital wallet that supports on-the-go transactions and stores their digital assets. Ideally, they can use this digital wallet across metaverses.

The potential for transaction fees, exchange rate fees, wallet fees and premium services exists in the metaverse, just as it does in the real world. But financial services providers can also think more creatively about how they integrate financial services into both the metaverse and real world, and the cross-over between the two.

2) Make safety your responsibility. To be truly viable as a place to “live” and do business, the metaverse will need real-world controls to protect users from abuse, fraud, and loss. Regulation takes time and is difficult to apply globally. The architects of these virtual spaces must work together with banks and fintech partners to leverage their technology expertise and governance experience to deliver secure transactions and safe custody of assets.

3) Consider the user experience. While banks may rush to snap up virtual real estate in the metaverse, their focus needs to be not only on what they deliver to potential users, but how. If the environment does not give users an intuitive, accessible, and immersive experience they expect, their leadership position will quickly be eroded. In part, this will be driven by the means of accessing the metaverse – neither a 2D screen nor a VR headset are conducive to this, which is likely to lead to a new generation of wearables.

Safety and convenience are part of a rich user experience, so an open but secure financial infrastructure could accelerate the way to a more portable immersive future.

Ultimately, a large amount of wealth will be invested, spent and moved in the metaverse. By reinventing themselves and their solutions in a virtual world, real-life financial services and technology providers can shape the way that wealth is created and transferred and build a bridge to this new frontier of opportunities.

-- Contact us at [email protected]


Group Managing Director, APAC, Banking Solutions at FIS