EXCLUSIVE: “De-hyping the Metaverse” – Jieke Pan, Mobiquity in ‘The Fintech Magazine Issue 26’

Jieke Pan, CTO and VP of Engineering at Mobiquity considers what banks are doing now and what they should do to reap the benefits of a virtual world

On June 26, 2000, the first draft of the human genome was released to the world. Seven years later, on June 29, 2007, the iPhone was unveiled. While both events promised to change our lives, it’s probably fair to say that to date, only the smartphone has delivered for most of us.

So far, it is unclear whether the rebranding of Facebook to Meta on June 9, 2021 will be more akin to our experience with genomics or the smartphone. Nonetheless, it made many more of us wonder what the metaverse really was. Interest in the technology surged during the Facebook Connect event last October when the company outlined its vision for the metaverse as the natural successor to the mobile internet – a veritable set of interconnected digital spaces that let you do things you can’t do in the physical world’.

Following that announcement, the metaverse market was predicted to reach $800 billion by 2024. Is it hype or substance? Is the metaverse just another attempt to rehash the same technologies that failed when launched via the likes of Second Life?

Perhaps we should start by looking at what the metaverse is (and what it is not). In Navigating The Metaverse, UC Berkeley’s Tommaso di Bartolo provides a good summary. He defines it as “the next generation of consumer engagement: an immersive experience with a self-sustaining, community-driven economy at its center. It is a new digital reality for consumers, empowering shared value creation: building empathy with brands by becoming part of the product.

“The only way technologies in the banking sector are likely to succeed is if they become an important part of the financial services technology stack”

Given the nascent nature of the technology, there are understandable comparisons to the early days of the internet. For every Jamie Dimon, who stated that the metaverse represents a $1 trillion opportunity when JPMorgan Chase became the first major bank to develop a presence in it, there is a skeptic in the market. In fact, despite all the talk about consumer engagement, a February 2022 survey found that around half of Americans didn’t even know what it was.

Yet Mobiquity’s recent research found that 75 percent of banks in the US and more than half (56 percent) in the UK are actively engaging with metaverse technologies. Perhaps understandably, larger banks are more active than smaller firms, and most believe the metaverse will help them reach their customers. JPMorgan was first in with its Onyx Lounge, which was launched to provide a hands-on demonstration of the benefits the technology could provide. In its report, Opportunities In The Metaverse, the company states its expectations that the metaverse ‘is likely to infiltrate all sectors in one way or another in the coming years…

As a result, we’re seeing companies of all shapes and sizes enter the metaverse in various ways, including household names like Walmart, Nike, Gap, Verizon, Hulu, PWC, Adidas, Atari, and others. Business leaders and boardrooms around the world are now asking themselves, ‘what is my metaverse strategy?’. For Bank of America, it’s using virtual reality as part of its training, aiming to give more than 50,000 employees a platform to practice a wide range of simulated client interactions.

“Virtual reality (VR) is highly effective in helping teammates build and retain new skills, and it’s one of many ways we use technology to support internal mobility and provide best-in-class learning opportunities,” the company says.

French bank BNP Paribas has long been a proponent of VR-based services, and its first foray into the metaverse has come via something it refers to as WIRED (Wearable Immersive Real Estate Dataroom). This is a digital twin that provides an exact replica of an actual city, allowing the company to look at the way cities develop. For example, WIRED will allow users to explore different European neighborhoods, complete with qualified data for each property.

“The transaction business is changing; technology supports the transformation, and WIRED is a perfect example. This immersive tool will allow us to better respond to our clients’ questions and needs,” explains Eric Siesse, Deputy Director of BNP Paribas Real Estate Transaction.

Meanwhile, British bank HSBC made its first move into the metaverse via The Sandbox virtual community. The financial group has purchased a lot of virtual real estate in The Sandbox that the company will use to engage with users on the platform. Ultimately, HSBC believes that the metaverse will eventually become the most important way to interact with the company in the Web 3.0 era, with a wide range of new customer experience opportunities as a result.

AN IMPORTANT COMPONENT OF THE TECHNICAL STACK

As research from ETH Zurich illustrates, use cases like these can often be crucial in helping us understand new technology, but the breadth of applications being tested by banks suggests that no ‘killer app’ has yet been stumbled upon to find areas for the more cautious among us to follow. The naysayers will no doubt point to the considerable hype that surrounded Second Life, with advocates urging companies to set up virtual showrooms to engage with consumers in this new and exciting platform, only to see it fail to catch on and underperform return on these investments.

The only way metaverse technologies in the banking sector are likely to succeed is if they become an important component of the financial services technology stack. We have already seen cloud technology reach that stage and it is now a central part of most financial companies’ IT systems. But it’s still uncertain whether the metaverse will even come close to recreating that level of transformation.

This perhaps explains why the first attempts at the technology by the big banks have been at an application level, rather than a system level. In other words, they have begun their metaverse journey by doing what they already do in a slightly different way, rather than using technology to fundamentally change how they operate.

SYSTEM CHANGE

Back in 1990, American management consultant Michael Hammer famously wrote in the Harvard Business Review that we will not reap the benefits of computers until we reengineer the way companies operate to take advantage of the opportunities they offer. Since then, there has been an understanding that generational technologies tend to start the journey by creating Henry Ford, giving us a faster horse, before finally providing real value by reimagining what is possible. In their latest book Power And Prediction, Ajay Agrawal, Avi Goldfarb and Joshua Gans highlight this by outlining the three core ways technology can be used.

• As a point solution, which is when an existing procedure is improved. It can be deployed independently and does not require the system in which it is embedded to be changed
• As an application solution, which is when a new procedure is created and adopted independently. This also requires no changes to the system it is built into
• As a system solution, i.e. when existing procedures are improved, or new procedures are created, by changing dependent procedures

GRAB THE OPPORTUNITY

It is therefore perhaps no surprise that it is in the smaller fintechs where this initially unfolds, developing a banking system to facilitate the exchange of goods and services from virtual worlds to the real world, and the first bank specifically developed for the metaverse . Startups have no legacy systems to deal with, so they can build from scratch something designed specifically with the virtual world in mind. If we are to truly realize the opportunity that the metaverse presents, it is clear that much more significant implementations of the technology will be required than we have seen to date.

There is a clear sense from the banks that they believe the metaverse will provide valuable new ways for them to engage with customers. In our increasingly hybrid world, this may be more important than ever, removing friction in the customer experience by enhancing physical environments.

At Mobiquity, the idea is to look at the problems customers are facing now and how they can be effectively alleviated, whether using metaverse’s technology or not. The end game for metaverse technologies should go beyond the hype – to shift the virtual experience from connecting people to people, to connecting people and places: Web 3.0.

Before banks jump in to implement metaverse technology, they need to ask themselves if there is a need for the technology to solve a specific challenge, create a positive impact or improve existing systems.

This article was published in The Fintech Magazine issue 25, pages 38-39