Why Every Business Should Have A Metaverse Strategy – Forbes
Earlier this year, the management consultants McKinsey produced a report that said that the metaverse has the potential to generate up to $5 trillion in value by 2030 and is simply too big for companies to ignore. More recently, Bloomberg Intelligence said that the metaverse is the next big technology platform, attracting online game makers, social networks and other technology leaders to capture a slice of what they claim is already an $800 billion market opportunity. They say that the metaverse ia the next evolution of the internet and social networks..
In other words, “the metaverse” is a big deal and the fintech world should be formulating its own strategies to bring embedded finance to virtual worlds.
But why, exactly?
Deloitte say that “In the simplest terms, the metaverse is the internet, but in 3D” but I don’t think that explains why The Metaverse is so important and why it will change the world of financial services. If the metaverse is just going to be something like Fortnite but with players selling each other insurance it doesn’t sound very much fun. There has to be something more going on.
I would like to suggest a different narrative to explain why everyone should be developing a Metaverse strategy: “In the simplest terms, the metaverse is the internet, but with security”.
You are your reputation.
While definitions of the metaverse may vary, and vary pretty wildly from the most nebulous notions of online interaction to some more specific, functional uses of immersive experiences, what is lacking as far as I can see is an overarching shared narrative that can help inform strategies (and some short-term tactics) for new products and services that will be the basis of new business in this new environment.
So how should we go about formulating that narrative? It seems to me that central to any useful narrative about the new virtual space for business to move into is the issue of security. As has been often said about the Internet, the lack of a security infrastructure and the consequent lack of what we might think of as the identity and value layer has led to no end of imperfect (and in many ways, dangerous) patches being applied without fixing the underlying problem: the internet is not safe.
(And I don’t just mean it’s unsafe in that you get spam about dubious supplements and links to ransomware masquerading as information from the “Microsoft Support Department”. I mean unsafe as in no-one knows what is real any more, co-ordinated inauthentic behaviour is the norm and the network has toasters, automobiles and remote pipeline monitoring applications on it and they are all getting hacked.)
Deutsche Bank’s October report on the subject talks about multiple metaverse ecosystems, that allow interoperability through standard solutions digital identity and asset ownership. I agree wholeheartedly and also agree with their view this Metaverse could usher in the next e-commerce revolution as it gains traction and that “financial services firms have a significant role” in this evolution to a post-post-Industrial economy.
(By new convention I will henceforth capitalise the Metaverse to mean the superset of metaverses that will serve many different global communities.)
This e-commerce revolution will come because those standard solutions of the trading of assets between digital identities will form the security layer that was missing from the Internet because (as I wrote here in Forbes last month) security is an an integral part of what the metaverse actually is.
The specifics of whether it’s web3 or web5, verifiable credentials or soulbound tokens that provide the security is a discussion best left for another day, but the heart of the narrative is that the Metaverse will have a security infrastructure in it from the beginning and that is why the Metaverse is both different from the Internet we know and love and more attractive than the Internet for a great many new economy stakeholders.
This is not an idealogical issue, it’s simply that safe transactions are cheaper transactions and financial services will inevitably follow those transactions.
The opportunities, as my good friend Lisa Moyle wrote earlier this year, go far beyond simply offering conventional services in the new space. The trade in tokens, to put it bluntly, is already expanding with virtual commodities in the art and fashion sectors seeing strong investment and the transactions underlying these purchases potentially benefiting from the involvement of players in the financial industry.
If the Metaverse is indeed an environment with a security platform built in, and it is a security platform that can support mechanisms to exchange assets, and establish the ownership of those assets, which we might crudely categorise as a digital value platform and a digital identity platform, then it is not an unreasonable prediction that individuals, organisations and businesses will steadily migrate their transactions from the dangerous badlands of the web1 and the restrictive walled gardens of web2 to in order to take advantage of that fundamental property: safety.
It is not unreasonable to be sceptical about the Metaverse. Jeffrey Funk, Lee Vinsel, and Patrick McConnell write in some detail about what they call the Metaverse “bubble” and go on to examine the economic effects of bubbles by comparing this technology bubble to past ones. They say that the biggest difference is that some goods did emerge from the dot-com bubble but “probably not much will result from the current bubble”. I am not convinced by this argument, because the goods here are not the Metaverse itself (however interesting and entertaining that might be) but because it will become a nexus for safer commercial interaction and the location of better, cheaper and faster financial services.
The bumper sticker version? Tokens are not tulips!
Red tulips flowers. Korea.
As I have written before, I think we can already see that a digital value layer, with mechanisms for the exchange of assets without clearing and settlement, is coming into existence via the technologies of tokens and decentralised finance. But for financial services we need identity and it seems less clear to me how the digital identity layer will come together, although I am optimistic that the relevant technologies will soon be deployed in institutional settings that will accelerate the shift of business into the new space.
I say institutional because I am unconvinced that the majority of consumers will want to manage their digital identities themselves, preferring regulated institutions to do this for them. This why I think that, to choose just one example, JP Morgan’s digital wallet that will enable people to select which credentials they share with counterparts could be so important.
(They highlight five ways that digital wallets are changing customers’ expectations: “Martini” use, personalisation, loyalty, integrated banking and invisible payments. I agree, of course, but I think that the digital identity components will in time be more important than the payment components.)
By bringing together new virtual worlds with digital objects that can be owned we can create that spectrum of metaverses with specific and desirable properties. These worlds will connect people just as the Internet did, but this time safely.
Leave a Comment
You must be logged in to post a comment.