In the space of two years, the metaverse went from a tech industry buzzword to a widely discussed emerging reality.
At the core of the concept is the idea that the digital experience can and will be far more immersive and integrated, with profound consequences for how the world communicates.
Yet to date, much of the conversation has centered on metaverse pioneers in the world of gaming, and isolated experiments in retail and the arts.
But if the metaverse is to coalesce as a holistic experience of digitality, it will touch every sphere of social life.
And banking will be no different. Having already experienced a digital transformation, first by the internet, and then by the smartphone revolution, recent indications suggest that the next step in the way consumers interact with financial services will be informed by the virtual environments known as the metaverse.
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Banking on the Metaverse
Last week, for example, the banking group Emirates NBD launched a global accelerator program for metaverse start-ups.
As stated in a press release, the new accelerator will focus on three key areas: “building the technology stack to facilitate the shift to 3D, creating virtual worlds to augment the customer experience in the metaverse and enabling a decentralized payment infrastructure for customers to create, monetize, buy and sell digital assets and services.”
And it’s not just the Emirati banking group alone. Other banking heavyweights are also trying to get a slice of the pie.
Earlier this year, a report published by JP Morgan entitled “Opportunities in the Metaverse” highlighted that “the metaverse will likely infiltrate every sector in some way in the coming years, with the market opportunity estimated at over $1 trillion in yearly revenues.”
To coincide with the publishing of its whitepaper, the bank opened the Onyx Lounge in Decentraland’s Metajuku mall. Within a few months, digital bank Quontic and Imagin, the mobile-first subsidiary of Spanish lender Caixabank, had followed suit, opening their own virtual locations on the platform.
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Away from Decentraland, HSBC has purchased a plot of virtual land in the Sandbox, where it is developing its own metaverse projects in the areas of gaming and eSports.
Web3 and the Future of Financial Services
As the quintessential Web3 virtual world, JP Morgan’s choice of Decentraland for their first metaverse outpost is telling. It acknowledges the role the technology and politics of decentralization will play in the emerging field of metaverse banking.
In Web2 virtual worlds, projects like Second Life function as privately owned ecosystems where “in-game” currencies and objects are ultimately controlled by whichever corporation administers the virtual realm itself.
But in the new generation of metaverses, cryptocurrencies, decentralized autonomous organizations (DAOs) and non-fungible tokens (NFTs) have allowed the likes of Decentraland to pioneer new, more decentralized models of ownership and governance.
Furthermore, today’s distributed ledgers enable a level of interoperability absent from Web2 virtual worlds, where digital objects are bound to the context in which they are made. The Web3 metaverse, on the other hand, has the potential to be a more open-ended ecosystem, with much of the discussion surrounding NFTs in the metaverse centered on cross-platform and cross-chain mobility.
If technologies that use distributed ledgers to record value and ownership have transformed the way virtual worlds operate, Decentraland’s Ethereum-based tokenomics is proof of concept for the kind of decentralized payment infrastructures that Emirates NBD will explore with its new accelerator.
As the financial services sector carves out a space in the metaverse, JP Morgan and Emirates NBD appear to be banking on the continued significance of distributed ledger technology in the next phase of digital finance.
To date, preliminary movements from the likes of JP Morgan and Emirates NBD suggest that the evolving architecture of the internet will be reflected in the coming age of meta-finance. But that isn’t to say that centralized economic modes will disappear entirely. Whatever form the central bank-issued money of the future takes, that too will have to be accommodated by financial institutions operating in the metaverse.
Ultimately, metaverse banking is in an embryonic state. Where banks will go next as they explore the possibilities presented by virtual environments is yet to be seen. But innovation accelerators like Emirates NDB’s and various banks’ early forays into virtual worlds are certainly a good place to watch new financial technologies unfold.
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