Innovators and traditional financial services companies like Fidelity Investments, JPMorgan Chase and American Express are already experimenting in the metaverse. The opportunities for the financial services sector are invaluable today, but perhaps the best analogue is the value created during the Renaissance.
Fidelity Investments said “the metaverse is the next evolution of the internet – a 3D model of the internet”. One of the most monumental periods in time for finance as well as science, mathematics and art – the Renaissance – did much the same thing. Greats like Michelangelo and Alberti perfected this use of linear perspective as a means of representing three-dimensional depth in art. Today’s metaverse puts us on the same trajectory and fintech could very well be the way to get there.
Fintech redraws the lines of financial services
CB Insights recently reported that “2021 was the biggest year for venture capital ever: over $621 billion invested globally – including $132 billion for fintech companies.” This means that one in five dollars invested in innovative ideas last year went to fintech. Catalyzed by a river of investor capital, cheaper and more ubiquitous digital channels (such as smartphone adoption), and ever-increasing customer expectations for frictionless financial services across industries, we can safely say that we are living in the fastest and deepest secular shift in the adoption of emerging financial services technology in history.
Innovative companies have replaced the metaphorical approach financial services take to developing new channels for delivering products and services with technologies that streamline infrastructure and, increasingly, augment human intelligence. These smart fintech platforms make it possible to aggregate and analyze customer information in a much more efficient and robust way, while taking greater advantage of connectivity. This means financial services have been able to reach more customers more efficiently and with more targeted products than ever before. Certainly, there is much more to do here; however, an important consequence of these efforts has been a future financial services industry with broader access, lower marginal costs and greater transparency.
The digital shift is accelerating
Fintech has had a huge impact on financial services and other industries. For example, the banking sector has seen a monumental shift in recent years, with fintech shaking things up on all fronts. But it’s not just our contemporary form of banking that seems to be transitory.
Over the past decade, and certainly accelerated by the global health crisis, other areas of financial services such as payments, custody and compliance, institutional and retail investing, real estate and insurance, among others, have benefited from innovative fintech solutions.
It’s tempting to suggest that companies and countries that have mastered the art of making real-time, convenient financial transactions have a competitive edge at the start of this next decade of innovation. But that would be a miscalculation. It may well be that the emergence of the metaverse, when combined with fintech, has the real potential to improve nearly every aspect of the financial industry.
The dramatic changes that have taken place in financial services seem to be moving in the direction of a new format entirely with the adoption of more digital technologies. In most parts of the financial services industry, some if not all participants have moved from analog to digital. In some regions, even legal tender – i.e. banknotes and coins – is transformed by more efficient methods of exchange such as CBDCs (central bank digital currencies).
The metaverse can reconnect the financial services industry
As a construct, the metaverse seeks to be an interoperable digital world where people converse, earn and spend, and most importantly, merge real and virtual assets. Its mere existence requires new thinking about securing our identity, conducting transactions, and owning assets. With a focus on interoperability, Web3 and the Metaverse could very well reconnect a financial services industry that still struggles with inclusivity at its economic core, albeit in an immersive online environment.
Blockchain is a technology that will underpin our emerging immersive world. Although it has been seen by some as the cornerstone of the future of financial services, it has been a long time coming. The use of clay cuneiform tablets and a chisel to make registers that relied on loaves of bread or jars of olive oil has existed since at least Mesopotamian times.
More contemporaneously, Institutional Investor magazine editor Michael Peltz called it out in 2015 when he wrote, “The beauty of blockchain technology is that you can make a transaction that is confirmed immediately and in ten minutes, the entire network is updated. Unlike clay tablets or spreadsheets, blockchain technology provides the immutable, near real-time confirmation of asset ownership or identity that is essential to a functioning, boundless, yet integrated metaverse.
Programmable money will have a similarly central role in the metaverse, as will the regulatory and legal constructs that define (or don’t) define new consumer protection standards. As the metaverse crosses borders and engages in traditional financial transactions outside of the digital world like mortgages, the integration of currencies that engender trust, acceptance, and stability is paramount.
It’s hard to predict what the future of finance will look like, but one thing is clear; it won’t be like today. However, fintech and new technologies will lead us to a new digital future in one form or another. The metaverse may well be the center of financial services and fintech will help the new Michelangelos thrive.
About the Author: Sarah Biller is a FinTech entrepreneur, investor, and educator. She is co-founder of FinTech Sandbox and executive director of Vantage Ventures. Most recently, Sarah was Head of Innovation Projects at State Street Bank’s Global Exchange Division and its Chief Operating Officer for Innovation. Prior to joining State Street, she was co-founder and president of Capital Market Exchange (CMX), a privately-funded predictive analytics platform using investor sentiment to help bond investors anticipate near-term changes in spreads.