Is the metaverse the next renaissance in financial services?

Innovators and traditional financial services companies such as Fidelity Investments, JPMorgan Chase and American Express are already experimenting in the meta-version. The opportunities for the financial industry are invaluable today, but perhaps the best analogue is the value created during the Renaissance.

Fidelity Investments has said that “the meta-verse is the next development of the internet – a 3D model of the internet.” One of the most monumental periods in the time of finance as well as science, mathematics and art – the renaissance – did about the same thing. Greatnesses such as Michelangelo and Alberti perfected this use of linear perspective as a means of depicting three-dimensional depth in art. Today’s metavers put us on the same path, and fintech may well be the means to get there.

Fintech is redrawing the lines for financial services

CB Insights recently reported that “2021 was the largest year of venture capital ever: more than $ 621 billion invested worldwide – with $ 132 billion for fintech companies.” That means one dollar out of five invested in innovative ideas last year went to fintech. Catalystized 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 all industries, we can argue that we live in the fastest, most profound secular shift in the introduction of new technology for financial services in history.

Innovative firms have replaced the metaphorical mattock approach used by financial services to develop new product and service delivery channels with technologies that streamline infrastructure and increasingly increase human intelligence. These smart fintech platforms enable client information to be much more efficiently and robustly aggregated and analyzed, and also further leverage connectivity options. This means that financial services have been able to reach more customers more efficiently and with more targeted products than ever before. Admittedly, there is much more to do here; An important consequence of this effort, however, has been a future financial services industry with broader access, marginal cost reduction and more transparency.

The transition to digital is accelerating

Fintech has had a consequent impact on financial services and other industries. For example, the banking industry has undergone a monumental shift in recent years, with fintech shaking up on all fronts. But it is not just our modern banking form that seems to be temporary.

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 investment, real estate and insurance, among many others, have benefited from innovative fintech solutions.

It is tempting to suggest that the companies and countries that have mastered the art of making financial transactions practical and in real time have a competitive edge into this next decade of innovation. But that would be a miscalculation. It may well be that the emergence of metaverse combined with fintech has the real potential to improve almost all aspects of the financial industry.

The dramatic changes that have taken place in financial services seem to be moving in the direction of a completely new format with the introduction of more digital technologies. In most corners of the financial sector, some if not all participants have moved from analogue to digital. In some regions, even legal tender – that is, banknotes and coins – are being transformed using more efficient exchange methods such as CBDC (digital central bank currencies).

The meta-verse can reconnect the financial sector

As a construction, the meta-verse seeks to be an interoperable, digital world where people talk, earn and use and, more importantly, merge real and virtual assets. Only its existence requires innovation to secure our identity, carry out transactions and own assets. Through their focus on interoperability, Web3 and metaverse can very well connect a financial industry that is still struggling with inclusion back to its economic core, albeit in an immersive online environment.

Blockchain is a technology that will underpin our new immersive world. Although it has been touted by some as the cornerstone of the future of financial services, it has been a while. The use of clay cuneiform tablets and a chisel to make ledgers that kept the count on bread or glasses of olive oil has existed since at least Mesopotamian times.

More at the same time, Institutional Investor magazine editor Michael Peltz called it in 2015 when he wrote: “The beauty of blockchain technology is the fact that you can make a transaction that is confirmed right away and in ten minutes the entire network is up to date.” Unlike clay tablets or spreadsheets, blockchain technology provides the unchanging, near-real-time confirmation of ownership of assets or identity that is essential to a well-functioning, boundless, but integrated metaverse.

Programmable money will play a similar central role in the metaverse as the regulatory and legal constructs that define (or do not) the new standards of consumer protection. As metavers cross borders and engage in traditional financial transactions outside the digital world such as mortgages, the integration of currencies that create trust, acceptance and stability is crucial.

It is challenging to predict what the finances of the future will look like, but one thing is clear; it will not be the same as today. However, Fintech and new technologies will drive us to a new digital future in one form or another. Metaverset may well be the center of financial services, and fintech will help the new Michelangelos thrive.

About the Author: Sarah Biller is a FinTech founder, investor and educator. She is a co-founder of FinTech Sandbox, and CEO of Vantage Ventures. Most recently, Sarah was Head of Innovation Ventures at State Street Bank’s Global Exchange Division and its Chief Operating Officer for Innovation. Prior to joining State Street, she co-founded and chaired the Capital Market Exchange (CMX), a privately funded predictive analytics platform that uses investor sentiment to help bond investors predict short-term spreads.