Introduction to the metaverse: Implications and opportunities across financial services

The views and opinions expressed in this article are those of the thought leader as an individual, and are not attributed to CeFPro or any particular organization.

Miguel Navarro, Executive Technology Leader and Patented Inventor

How can the metaverse be used to impact key areas of banking?

There’s a lot of complicated topics where we can take this but in an effort to simplify things –  let’s select two areas: Product Awareness/Education and Brand Loyalty. Let’s also create a baseline of an organization existing in that metaverse and how they can monetize on being part of said metaverse.

As a quick peek into Product Awareness/Education, look at the opportunities of gamification to introduce or create use case awareness for your product. Let’s look at transfers and the auto-transfer feature – how most people use that to transfer money from one account to another. However, you’d want to approach the gamification aspect, make sure that it creates a clear picture to the use case you’d want to casually suggest to your client – in this example, let’s use auto-transfers to be able to save for liquidity to invest in cryptocurrency. The organization’s space can do some gamification on the feature, maybe even create a movie theater where folks can watch interactive educational videos on cryptocurrency to minimize risks for clients on buying cryptocurrency for the first time, or even create interactive posters that show a projection of “if you saved X dollars a month, you would have Y dollars today if you invested in these 3 cryptocurrencies.” It’s about showing the value of the feature/product in a specific way for customers to increase enrollment and usage which will generate operational costs savings at the very least.

As for Brand Loyalty, let’s look at the interactive poster I mentioned above and let’s imagine being able to hand that to clients that have visited your organization’s space in the metaverse as an NFT. Let’s create an assumption that owning the NFT will allow you to deploy an interactive poster in the client’s space. Why would any client want to publish your interactive poster in their own space? Simply put, it’s because they can monetize from it. If every single interaction that led to a completion of a task is partially rewarded to the owner of the NFT, don’t you think more people will actively try to get that asset for themselves and create not just brand loyalty but also close to free advertising via the NFT that will remain dynamic.

What implications could web 3.0 have on financial institutions using the metaverse?

There’s always pros and cons to everything. I think the biggest pro would be opening that FI to transactions and use cases primarily for clients that have already adopted into and gained reputational + transactional maturity in the Metaverse channel. In 2009, if you were a financial institution that didn’t adopt into mobile – it wouldn’t have impacted your business at all because the maturity of the mobile channel and the customer base wasn’t there. However, the companies that did adopt and integrated the mobile channel early acquired the head start that allowed them to carve a healthy share of the customer base and be in a much better place technologically today.

I think one of the biggest cons would be the integration of associated risks already present in Web 3.0 without being acclimated to the speed of how fast transactions and processes move in Web 3.0 Imagine being a business that makes windows only for tropic regions and you’re now thinking of taking your business to temperate regions – how fast can your business analyze risks that didn’t exist before – what are the new seasons, max wind speed, etc. exists? From there trying to implement and manage those changes to your existing material and manufacturing models where your costs and margins remain somewhat similar. On top of that, think of your logistics network so your existing delivery channel can reach your new markets. Can your organization adopt and stomach the risks involved?

What are the risks associated with organisations using the metaverse?

Just like any opportunity within embarking in a new channel where user adoption only increases – the risks mitigated all depends on your organization’s agility and velocity in addressing it in a timely manner. Simply put, if your organization can release almost every time in a two week sprint then that means your exposure in your most critical risks will likely be addressed every two weeks vs. if your organization can only do releases every two months. Now the part of “where user adoption only increases” – that also means that the complexities of cyber security risks and other social engineering vulnerabilities increases as more time passes because malicious characters will only improve over time. To balance out risk and benefit though, ask your self the question – knowing all the business benefits involved in web and mobile over the years, would your organization risk not having those channels today?

Being part of the Financial Institution world, it is very natural to be risk averse and stick to traditional means or “how” the business has been running. To be successful in a client-centric business, you have to be where the clients are because you always want to be available in their preferred channel. “How” we do business vs. “Why” we do business is very important to separate and prioritize. If you look at the “Blockbuster vs. Netflix” model – Blockbuster’s “How” was more important than the “Why” and it was the opposite for Netflix. In this model, the “how” is to ‘physically rent out DVDs’ and the “why” is ‘so clients enjoy movies and shows’. Blockbuster believed in “Physically rent out DVDs so clients enjoy movies and shows.” Netflix believed in “So clients enjoy movies and shows, physically rent out DVDs.” When the world changed and customers started adopting streaming (without achieving critical mass in their subscribers yet) Netflix changed the “how” because it wasn’t as important as the why – Blockbuster didn’t. Netflix changed to “So clients enjoy movies and shows, physically rent it out or stream it.” When clients who rented DVDs slowly shifted to streaming, Netflix was the leading streaming platform. When Blockbuster started to pivot, it was already too late.

How do you see the metaverse growing over the next 10 years?

Just generally speaking – there are a lot of factors for growth of a metaverse including client usage, network transactions, investment portfolios, etc. In my opinion, at the very least, the metaverse collectively will have a larger user base, more organizations will adopt the channel, and that there will be some changes in the leaderboard of top 50 companies globally with the biggest annual gross revenue – all based on who has adopted into Cloud platforms, AI/ML, and Web 3 quickly and effectively utilized available technology while being adaptable to their client base.

What are the potential impacts of the legislations around cryptocurrency and the metaverse?

Just generally speaking – in my opinion, I feel like the legislation changes already started on financial and tax implications for owning/trading cryptocurrency, Third Party PII data usage, etc. All of these will only increase and get more complicated over time. The ease of access to the metaverse, owning digital wallets, etc. will still be going through significant changes and lots of the usage volume will depend on how difficult it is to acquire and maintain clients. I think based on the cryptocurrency impacts we’ve seen over the past 2 years; it’ll be a great idea for organizations to have lobbyist fighting for what they would want or even just being aware of where the tides are shifting to be able to protect their investments.

Miguel was a speaker at our 2022 Customer Experience & Digital Banking Congress.