Article on Fintech in the Metaverse (2022) from A3 Techworld. What do we know of the Metaverse and how can it transform the financial world? How will this benefit businesses and individuals operating in the virtual world?
To prepare for this future, we’re expanding our efforts to support more excellent Web3 compatibility, as decentralized Web3 technologies like blockchain and NFTs have enabled new ways to exchange value. The metaverse has significant implications for the future of financial technology and could enable a digital economy that supports millions of people, creators, and businesses.
As the third generation of web browsing approaches, technologies across many industries are forced to adapt to remain relevant. Businesses are offering services and products that are more immersive, decentralized, and digital than ever before. The financial technology industry is no exception. There are several ways that Fintech has begun to break into the Metaverse that entrepreneurs should understand to keep their businesses competitive and innovative.
We are at an inflection point. The beginning of the next chapter for the internet. An opportunity to break down barriers and democratize access to and ownership of goods and services.
The metaverse will transform the way people connect, businesses grow, and creators make a living. And with it, bring about better social experiences than anything that exists today, and a digital economy that supports millions of creators and businesses.
There’s been good interest recently around how we might approach payments and financial services in the metaverse. While it’s all still very early, I think it’s important to shed some light on how we’re thinking about it.
The Economy of the Metaverse in 2022
While AR and VR are dominating metaverse developments right now, there is a significant financial side of the story. As consumers are further driven toward immersive digital experiences, they are also drawn toward virtual assets that require a new digital financial model. This involves crypto, non-fungible tokens (NFTs), and more, which occupy an important place in the layers of the metaverse.
Non-fungible tokens (NFTs) are growing in popularity faster than government regulations can keep up. Their main value is that they can represent unique digital items and serve as a vehicle for profit for many investors looking to get ahead of the curve. Although controversial due to many people in the market using NFTs that involve stolen art or shady investing practices, NFTs have the potential to drive the digital economy forward.
Thanks to this technology, brands can present their real assets and solutions in a decentralized digital environment in the form of NFTs. Blockchain ensures the immutability and transparency of such a system, making the economy clearer for users. Moreover, NFTs could enable users to transfer digital items from one platform to another and gain access to special features in certain virtual environments.
The sale and purchase of digital assets involve the use of digital currency, and today cryptocurrency is the most realistic way to support metaverse shopping. For example, one of the most popular Web3 use cases, Sandbox, has an internal SAND token that can be used to buy virtual land, buildings, accessories, and other items in the form of NFTs. Users can buy and sell it on a number of cryptocurrency exchanges.
Such a digital economy system opens up new opportunities for investment and wealth management that cannot be missed out on by modern fintech projects. Therefore, it is not surprising that the Fintech blockchain market size is expected to grow to $6,228.2 Million by 2023 from $230.0 Million in 2017, according to MarketsandMarkets.
Fintech Services in the Metaverse (2022)
There are a number of ways that fintech businesses can break into the metaverse to serve clients. This includes examples of immersive experiences within digital banking, trading cryptocurrencies, consumer-first digital payment options, and more.
Immersive Digital Banking
One of the main reasons brands use the metaverse is to increase customer engagement. The most popular metaverse technologies involve immersive virtual spaces in augmented reality and virtual reality. Fintech is a field that can also adopt this experience. Many fintech companies are already providing digital-only services through mobile apps and websites instead of in-person locations. Against this background, being able to ‘visit’ an immersive bank in virtual reality sounds like a futuristic and interesting concept.
Banking in the metaverse, based on AR/VR technologies, can allow users to check balances, pay bills, make transfers and make transactions in a 3D environment, through enhanced data visualization. In addition, banks can expand their role as custodians of customer assets in the metaverse with crypto and NFT-related services.
67% of banking executives believe that the metaverse will have a positive impact on their business, according to The Accenture Technology Vision survey. You can already find successful cases today. For example, the Korean bank KB Kookmin Bank provides its customers with the opportunity to interact with financial advisors in a virtual environment. J.P. Morgan has expanded its footprint to Decentraland with the Onyx blockchain-based platform enabling banking services in this virtual world.
Many projects are already in development and if you are thinking about becoming part of the metaverse, it’s time to start working on partnerships with existing platforms or invest in creating fintech platforms that support metaverse technologies.
Consumer-First Digital Payment Options
Going hand in hand with digital banking experiences on mobile devices and desktop computers, fintech businesses are seeing great success with offering options for consumers to send one another digital payments. Some examples of these include Meta Pay over their Messenger application and Zelle’s digital payment feature. Zelle has also partnered to provide this service to traditional banks like Huntington.
Blockchain and crypto payments are by far the most common payment method in the metaverse, but that doesn’t rule out other options and technologies. For example, QR payments, allowing you to simply scan a QR code displayed on the screen, or copy and paste the code into a mobile app, can greatly improve the user experience.
The use of AR technology also gives users a more immersive experience by providing cashless and contactless payments. For example, back in 2016, Visa began experimenting with augmented reality payments by creating an app with fashion brand House of Holland that allows you to visit the retail store and make a purchase by simply pointing your smartphone at the product. Today, this payment method will no longer surprise anyone, but it can still become a competitive advantage for the brand until it becomes mainstream.
Metaverse and Fintech
The word Metaverse has been making headlines in the last few months. Many leading organizations have created metaverse environments or become part of one.
Metaverse is an immersive Digital environment (Virtual World) where you can interact and transact. For e.g. Visiting a virtual mall and making purchases, attending an event/conference, Gaming, etc. So, many use cases across different Industries are possible.
You must be wondering; how different it is now from the Online Experience today. As these things can be done even now, remember Second Life (been there for over 10 to 15 yrs). Well, the difference this time it seems is, in form of an Immersive and rich 3D Experience. As a device, these are empowered by AR & VR Headsets which have become a little more affordable. All this getting accelerated with 5G and above bandwidth and Web 3 also comes into play gradually. Then there are usual suspects of Defi, Crypto’s, NFT, etc. which are getting bundled. But, my intent is just to give an initial intro, highlight the difference and move on to the main issues viz. Problems & Challenges and How metaverse can be effectively used.
So, let us quickly look at some problems & challenges w.r.t Metaverse
- Standards – With multiple metaverses emerging, there is no standard for interoperability between metaverses. This impacts communities being Islands
- Identity (Especially Digital) will be a big issue including Avataar’s etc. This ecosystem is not well developed yet
- There are various Privacy & Security concerns, and a few recent incidents have only reinforced the same. So, there is a need for a well-thought-out and enabling set of regulations.
- We are not fully there yet as we need 5G & Web 3. 5G has just started, and true decentralized Web 3 is a few years to be realized.
- Just like Identity, Interoperability Standards, etc., we need Secure Payments which are Native to Metaverse. There is good scope for CBDC type Digital currency too in the metaverse.
The future of Fintech in the Metaverse
The most likely way for financial services organizations to engage with the metaverse at first will be through virtual interactions with consumers. As previously mentioned, numerous fintech and financial services firms have taken preliminary steps in this direction by using AR/VR technologies. Few, however, have carried the notion as far as Korea’s Kookmin Bank, which constructed a “virtual town” on a metaverse platform that included a commercial center, a telecommunications hub, and an entertainment area.
This type of metaverse deployment can be utilized as a training environment for financial services personnel in addition to providing customer-facing capabilities. It’s simple to envisage financial institutions creating and supplying virtual environments to allow their wealth management teams, financial crime and regulatory staff, and others to further enhance their talents.
We should expect a profusion of enterprises catering to the financial demands of metaverse residents to the degree that the metaverse has its economy. Financial data management companies and financial infrastructure companies whose job it will be to help facilitate value exchange in the virtual environment, as well as digital identity and authentication providers – to say nothing of innovators like Soul Machines – will all play a significant role in such a world. Companies that create virtual assistants and other AI-powered agents for financial services will undoubtedly be important in the metaverse’s development.
Fintech Metaverse Apps
A Fintech metaverse app is a great chance for businesses to join the evolving Web 3.0. Some important fintech industry trends include virtual assistant features, embedded finance, lending technologies, money transfer, and more. All of these technologies are innovations that help fintech businesses accomplish their goals and provide better services and experiences for their customers.
For example, virtual assistant technology leverages artificial intelligence to help customers see insights about their spending and help inform their budgeting decisions. Embedded finance also has a number of opportunities for digital fintech businesses to integrate with traditional banking services to provide high-quality features to customers.
These are all features that are in demand with metaverse app development in fintech. It’s up to these businesses and the software developers they partner with to decide how they want these apps to accomplish their goals.
How Can You Prepare Your Fintech Business for the Metaverse Era?
This period of disruption shows that the next generation of the Internet is fast approaching. There are a number of steps that fintech businesses can take to prepare for these changes and remain relevant in the market.
Adopting metaverse technologies like augmented and virtual reality, artificial intelligence, the Internet of Things, and blockchain integration are all great steps. However, these steps must be actionable and make sense. It’s one thing to say that your business needs metaverse technologies when creating fintech platforms. It’s another thing to come up with a more specific plan. An example would be, using a virtual assistant in your app to transform data into tailored financial advice for customers.
One of the most important things to remember is that the metaverse is about connection, personalization, and innovation. These concepts should be embedded not only in the software but also in the entire strategy of your business.
The use of cryptocurrency in video games
Videogames have captured the center stage even before the ideation and initiation of the metaverse. The gaming world makes the digital world more engaging and fun for users. During the pandemic, games have kept people busy in isolation and let them enjoy a world that let them interact with the outer world when there was hardly any connection left.
Developers are increasingly looking at cryptos to conduct in-game transactions because they can boost sales via a play-to-earn model and conveniently function across borders with the use of digital currencies.