How Metaverse enables innovation in Fintech with EY, Unlimint and more
We have the invention and development of technology to thank for some of humanity’s most important advances. The invention of the telephone in 1876, the airplane in 1903, the computer in 1937 and the internet in 1974 completely changed how we live our everyday lives. As technology advances, how can the likes of Web3, metaverse, blockchain and DeFi change the future of fintech?
Throughout March Fintech Timeswe consider the topic of innovative technology and which inventions and developments can have the greatest impact on fintech.
Here in this next part of our month-long coverage of innovative technology, we will consider how the rise of the metaverse and associated technologies ushers in new forms of innovation in the fintech industry.
Our response to this will be supported by the invaluable insight of industry experts from Freeport, Hummingbird, Default DAO, EY Americas, Unlimited and HBAR Foundation.
Enables universality
We start our conversation, Colin JohnsonCEO and co-founder of Freeport, a platform that brings art investments on-chain, says “It’s honestly still too early and existing metaverse options are not compelling enough for the true fintech innovation to take place.”
However, according to Johnson, “it will happen soon.”
In this, he acknowledges how the emergence of the metaverse will require a smooth user interface that “allows users to engage with all types of digital value as they navigate a variety of different virtual scenarios.”
This includes purchasing goods with digital currency and the ability to transfer them to family members’ wallets and store their own goods.
“To enable this universality,” Johnson continues, “fintechs must build their solutions in an interoperable and composable way with other vendors – something many are not currently keen to do.”
He points to the advantages of open source code that facilitates this. “Open source development, combined with basic blockchain infrastructure, will lead to a whole new set of incentives and outcomes for builders in the space,” concludes Johnson.
Innovation in security
In addition to this, Joe RobinsonCEO of compliance CRM platform Hummingbird, sees that with an increasingly digital world, the metaverse will cement itself as “a new and emerging channel where people interact, initiate transactions and process payments.”
However, he also warns that with this “bad actors follow the money,” saying the metaverse is “an attractive space for criminals to launder large sums of illicit funds and assets.”
But reassuringly, Robinson is adamant that progress through regulatory railings will help track illegal activities digitally.
“To ensure that individuals and companies are protected when handling metaverse-related assets, financial institutions participating in the metaverse must ensure that they understand and prepare for the unique risks of digital currencies,” he continues.
“This starts with a strong compliance program and continues through cooperation with regulators and law enforcement as the metaverse takes shape.”
Innovation in efficiency
As CEO of the decentralized finance ministry StandardDAO, Aaron Rafferty sees how the metaverse can provide a “more accessible, transparent and secure environment for financial activities.”
“Using blockchain, digital identities and artificial intelligence (AI), users can engage in financial activities without the need for intermediaries, reducing costs and increasing efficiency,” Rafferty elaborated.
“This could lead to the creation of new financial products and services, such as decentralized financial applications (DeFi), which enable users to earn passive income and participate in global financial markets.
“In addition, the use of DAOs and smart contracts can automate financial activities of individuals and communities, reducing the need for human intervention and increasing the speed and accuracy of financial transactions,” he concludes.
Industry in the making
Matt Hatchfintech and private equity manager at EY Americas, starts by stating that the promise of fintech has always been to “deliver seamless value across a complex global financial and trade landscape.”
He explains that as a result of this commitment, technologies and innovations are currently at the forefront to enhance a frictionless metaverse experience.
“Underlying protocols and networks, digital wallet infrastructure and decentralized identities all have their roots in the fintech ecosystem,” Hatch affirms.
“As with all technology-enabled innovations, regulatory oversight and structure have yet to catch up to the full force of these innovations. It will be interesting to continue to advise the fintech and metaverse ecosystems as these conversations continue to take direction and shape,” he concludes.
The elixir of financial innovation
“The Metaverse is a hotbed of innovation in the fintech industry, offering new opportunities for financial services, products and experiences,” brings in Jovi Abovemanaging director of banking-as-a-service (BaaS) at financial services provider Unlimint.
For Overo, metaverse enables innovation in fintech by creating a more open, accessible and collaborative environment for entrepreneurs and investors to experiment and develop new solutions.
But when it comes to generating innovation, he affirms the leveraging of DeFi applications as one of the key ways the metaverse is enabling innovation in fintech.
“DeFi offers a more accessible and fair financial system, allowing individuals to trade and invest without relying on traditional financial intermediaries,” he explains. “This creates new opportunities for innovation in areas such as microloans, digital identity and smart contracts.”
“In addition,” Overo continues, “the metaverse creates new opportunities for collaboration and co-creation in the fintech industry.”
“Startups and established financial institutions can work together to create new financial products and services, leveraging the strengths of both parties to create something new and innovative.
“This can lead to the development of new financial ecosystems that are more efficient, transparent and inclusive.
“To conclude, the metaverse is a catalyst for innovation in fintech, creating new opportunities for financial services, products and experiences,” he concludes. “By embracing the opportunities offered by the metaverse, entrepreneurs and investors can drive the next wave of innovation in the fintech industry.”
Decentralized but integrated
In conclusion, our findings, Alex Russian manhead of the metaverse fund at The HBAR Foundation, confirms that the currently separate payment rails and reward platforms are being consolidated into a product ecosystem that is both “secure and decentralized, yet integrated” at the intersection of metaverse and distributed ledger technology (DLT).
Elaborating on this statement, Russman also describes how this consolidation is unlocking “unprecedented innovation” in consumer engagement.
“With DLT, payment transactions can be processed and recorded along with the earning and redemption of the rewards that consumers generate for various activities and transactions, such as shopping or completing surveys,” he comments. “This creates a more engaging and rewarding user experience, while increasing customer loyalty.”
“By tying the collection of rewards into the point-of-sale process, the drive to onboard users to loyalty programs will become a more attractive opt-in effort for consumers,” continues Russman.
“Rewards on Ledger can also be recognized and consumed by third parties, enabling independent coffee shops to cash out rewards with air miles, and Starbucks loyalty tokens to unlock experiences in Roblox.
As a parting note, however, Russman explains how this is quickly moving beyond the consolidation of just payments and brand loyalty.
Together, “Consumers can gain insight into the environmental, social and governance (ESG) impacts of their purchases, ‘vote’ for carbon-minimized products with their wallets and receive a share of the ESG rewards. The atma.io platform of Avery Dennison already collects this data on the ledger for more than 22 billion items.”
