The term Metaverse is taken from the imaginary town described in the sci-fi novel Snow crush by Neal Stephenson in which the hero Hiro spends most of the time. It is a virtual place with 3D and interactive engagement. The central purpose is to give the individual and corporations absolute liberty in controlling privacy of their data and provide a platform of access to all. This, in itself, is a noble aim.

Meta, ex- Facebook has created a virtual place by the same name- Metaverse.

Foundations of Metaverse

Technically, it is the next stage in the evolution of internet. Interactive engagement and three-dimensional showcasing of physical merchandise have been and are being attempted on the internet even today but without recognizable success. This should make that a reality. In addition, it would also facilitate trading of digital assets and settlement through digital currencies. In summary, it would be a merger of physical and virtual world but leaning more towards the latter.

Technology underneath Metaverse

The underlying framework is based on WP3 which has at its core distributed processing based on blockchain. To provide the interactive experience, technologies like AR/VR must be employed. Also, virtual avatars of the characters are needed to simulate near-live interactions. In other words, it rests on the belief that a sizeable population would be welcoming navigating a substantial part of their life in virtual world, just like Hiro did in the book Snow crush.

Drivers

Digital technology evolution is given. The covid has made us realize that, through experience in a telling manner. If life continued with minor disruptions, it is owing to the digitalization efforts of the necessities both for the individual and corporate consumers. A significant driver is that we have nearly 20% of the population today who are digital native. This proportion is only going to increase in the decades ahead. Virtual world inhabitation is given in this context.

Relevance of Metaverse to Banking

If virtual world is going to be the dominant arena for trade transactions in future, that would require a reliable financial system to support the trade. The move is facilitated by the maturity and central banks recognition of the need to move towards digital currencies. The infrastructure and medium of exchange are available and can be scaled depending on the demand. This is driving banks to take the pole position in Metaverse drive and adoption.

Early adopters of Metaverse

The big boys and not the neo techs who are driving this initiative - enterprises such as Walmart, Nike, Sony, Adidas, Samsung, Microsoft, Alphabet/Google etc. and banks such as J P Morgan, HSBC, Standard Chartered etc. 

Early clusters of Metaverse

South Korea with Kookmin, Woori and Shinhan; UK with HSBC and Standard Chartered and US with J P Morgan, American Express and Zelf besides technology giants such as Microsoft, Alphabet etc. Excepting south Korea, the cluster seems to follow the fintech clusters excepting the ones that are not triggered by them.

Some facts

It is worth considering the following:

• Market capitalization of equity markets is $117 trillion; Crypto market capitalization is $1.28 trillion.
• Global trade is $28.5 trillion; Digital assets trade is $1.5 trillion
• Population under 15 years is 1.35 billion which is 16% of the total.