The Metaverse: The next growth engine for financial services

October 4, 2022by admin0

By Srinivasan Seshadri, EVP & Head of Financial Services, NA, HCLTech

In 2021, internet users spent an average of 1 hour and 15 minutes daily on social media. Four years from now, 1 in 4 active internet users may spend at least 1 hour a day in the metaverse for work, shopping, social media or education. That’s how big this boom is.

While the adoption of metaverse technologies is still nascent and fragmented, leading economic and cultural forces are investing in these collective virtual open spaces to enhance digital and physical realities. Putting to rest any doubts regarding the high priority that tech companies are giving to the metaverse, Microsoft announced the biggest acquisition in its history – the $69 billion acquisition of gaming giant Activision Blizzard.

A galaxy of financial services?

At its heart, the metaverse is an accumulation of universes – an interactive, immersive and collaborative three-dimensional macrocosm. Emerging technologies and their practical applications in the convergence of physical and virtual realities extend the metaverse beyond gaming and entertainment to traditional sectors like banking. This has sparked interest among futurists and financial innovators to explore how the metaverse can reshape financial services.

JPMorgan Onyx metaverse bank
JPMorgan’s Onyx Lounge resides in the metaverse

The pandemic encouraged people to interact and pay digitally more than before, resulting in a boom of adoption that has nearly 9 out of 10 Americans using a fintech app today. Combined with the metaverse’s practical application to create fully functioning economies and virtual environments, this will encourage interoperability in the financial industry.

A first of its kind, JPMorgan set up shop in the metaverse, allowing users to create their virtual avatars, build virtual spaces and roam in the lounge christened ‘Onyx Lounge,’ after its suite of Ethereum-based services.

Build it, and they may come

However, as Fintech influencer Ron Shevlin recently said, “The ‘money in the metaverse’ isn’t in the metaverse right now. It’s in building the metaverse.” Top metaverse projects that have attracted real estate, like Sandbox, Axie Infinity, Decentraland and Enjin, are built on the Ethereum blockchain and use cryptocurrency for transactions in the metaverse.

Decentraland

Banks could build virtual commercial lending capabilities for businesses to leverage to establish themselves as leading metaverse lenders in a sea of metaverse property buyers. Metaverse property prices rose 700% in 2021, leading to $500 million in transactions – which could double in 2022. But it isn’t just price speculation driving the increase; it’s the opportunity to monetize virtual land with games, events and other revenue-producing ideas.

While some analysts believe that the USD will still serve as the primary currency that can facilitate this economy, others believe that in a world where accessibility, visibility and security are fundamental, cryptocurrencies will become a necessity rather than a choice. While the value of many cryptocurrencies continues to soar, lower liquidity and lack of regulation in the crypto market make the market seem extremely volatile to many. Unless virtual currencies and technologies like blockchain are fully functional, the metaverse is just an idea with no financial backing.

Virtual financial metaverse

meta city

The success of building and scaling in the metaverse is dependent on having a robust and flexible financial ecosystem that allows users to connect between the physical and virtual worlds seamlessly. For a genuine virtual reality environment to work and function as advertised, there will need to be transactions that occur on a secure and almost instantaneous basis. Thus, having a payment method that is secure, traceable and transparent will be an integral part of how this space will evolve going forward.

That said, undoubtedly, investment in the metaverse is an opportunity. We are rapidly approaching a time when the boundaries between the virtual and the physical world are blurred. Enterprises need to ensure that the customer experiences they offer, whether real or virtual, are impeccable and consistent. Financial services institutions that take decisive steps today toward bolstering their digital capabilities for the future will emerge victorious.

About the Author

Srinivasan Seshadri

Srinivasan Seshadri leads HCLTech’s North America business for Financial Services across Banking, Capital Markets and Insurance. With almost 15 years at HCLTech, he’s held leadership positions across a variety of roles, including product development, client development, sales, and solution architecture. He has spent the last seven years leading one of the company’s most successful Financial Services offerings globally – The ALT-ASM™ Program. His multiple roles spanning technology, management and sales in financial services provide him with a complete 360° view of the business, while ensuring that HCLTech’s offerings stay relevant to customer needs and priorities. More information here.

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