First things first: Metaverse x web3

The Metaverse is an interconnected and immersive digital environment combining various technologies including virtual reality (VR), augmented reality (AR), blockchain and digital assets amongst others, to deliver large-scale interactive and immersive experiences.  From that perspective, the Metaverse is often referred to as the 3D interface of the Web3 - the next generation of the web powered by blockchain technology and digital assets and based on the principles of decentralisation of power and control.

Notwithstanding the above, the Metaverse may come in different shapes, catering to various needs of participants while recognising significant maturity gaps amongst users. Private Metaverses are exclusive networks for specific groups or organisations, fostering collaboration within communities, think about it as the nextgen of the intranet. Public Metaverses are going much further, offering a shared virtual space for people and companies to connect, transact and engage in commercial activities, think about it as the nextgen of the internet.

Why it Matters for the FS Industry

Core to the Metaverse potential is the users’ participation, the new engagement models offered by virtual worlds and the transaction layer entailed by new exchange mechanisms enabled by digital assets.

At the time of writing, platforms such as Roblox have more than 10Mn users, Decentraland and the Sandbox are welcoming new brands and signing new partnerships on a weekly basis while strengthening their creator economies. Furthermore, while not completely out of the woods, the crypto-asset industry is recovering from a very difficult year - as discussed in our first installment , and looks forward to a heavy regulatory agenda. Finally, in the quest for a killer move, hardware providers have engaged in a fierce competition to deliver the most immersive and easy-to-use headsets to bring the most impactful experiences to users.

The equation is therefore rather simple: customers adoption + commercial transactions + new products and services = market opportunity for the FS industry.  The exact size of the opportunity is difficult to predict but as the Metaverse penetrates the global digital economy, it has the potential to reach a market value of up to $13 trillion by 2030 and it is predicted that 30% of organisations will have products and services ready for the Metaverse by 2026.

Which use cases?

Financial services firms have recognised the transformative potential of the Metaverse and are exploring various use cases within the industry. These include facilitating the access (ramp-on) to—and exchange of—digital assets (from fiat currencies to NFTs or other types of tokens) as the first building block of a larger, longer term strategy. As trust intermediaries, digital assets custody also appears as a natural next step for financial institutions, further reinforcing their core business towards a new audience of customers.

Financial institutions are also leveraging public Metaverses for brand (re)positioning, advertising, hosting events, and deepening customer relationships through personalised and targeted interactions. These initiatives appear to be great opportunities to develop their know-how and footprint in the field while initiating new engagement models with customers and testing new ideas.

Building on the above, the financial sector has an opportunity to be involved in processing payments, offering payment rails, crypto wallets, and cards, as well as enabling embedded finance in the Metaverse. Furthermore, they are securing, insuring, and lending against NFTs as collateral, allowing borrowers to purchase digital assets in the Metaverse. Offering discounts and rewards to consumers who use multiple Metaverse services is another use case that can be leveraged to strengthen digital loyalty.

While much is yet to be invented, these examples illustrate some of the  possibilities for the financial  sector to leverage the Metaverse and transform customer experience and financial services, hereby blurring the lines between legacy financial offerings and complementary and specialised products and services.

The way forward

Stepping into the Metaverse and Web3 is not an overnight process. Much of the disillusionment of the past few months is directly rooted in the false sense of understanding, of actions to undertake and the expectation of short term returns. Recognising and embracing the potential of the Metaverse and Web3 is certainly crucial for financial services firms. However, caution is warranted as these are still in their early stages and require proper understanding as well as a clear yet realistic roadmap. To get there, we encourage market participants to start their journey early, to adopt a holistic approach to these topics and to not underestimate the complexity and transformative impact they will have on their business. In the meantime, the players of the metaverse industry also have homework as devices' convenience and portability, seamless transactions and transition across metaverses, digital asset’s portability, and digital identity are just some of the key success factors which the industry shall focus on for the metaverse to effectively emerge as the new social and commercial interface that it promises to be.

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, Technology & Digital Partner at PwC Luxembourg

, Director, Blockchain & Crypto-assets Leader,  PwC Luxembourg

Roblox: Q2 2022 Supplemental Materials, https://s27.q4cdn.com/984876518/files/doc_financials/2022/q2/Q2'22-Supplemental-Materials-FINAL.pdf

McKinsey: Value Creation in the Metaverse; Goldman Sachs: Framing the Future of Web 3.0; Citi Group: Metaverse and Money

Gartner: Gartner Predicts 25% of People Will Spend At Least One Hour Per Day in the Metaverse by 2026