The metaverse is a hot topic which everyone seems keen to pontificate about, but less so to actually dip their toes in. The reasons for this, especially in the financial services sector, are obvious. This technology is new and not fully developed, and its benefits it offers  compared to a more traditional investment option remain to be seen.

Despite this, we did see some interesting moves into the metaverse during 2022, even if they weren’t entirely relevant to financial services: the Vatican announced their metaverse plans, PKO Bank Polski opened a metaverse outpost, and Visa filed for metaverse trademark applications.

At the moment the metaverse is new, and therefore the possibilities feel endless. As we start to drill down into its core technology and uses, we will continue to find where this technology fits within the remit of financial services.

In December last year Finextra completed the final instalment in our digital asset webinar series for 2022. I moderated this webinar, which covered the topic of the metaverse.

The panel consisted of:

-          Tom Ffiske, editor, Immersive Wire

-          Ben Hall, product manager - digital assets, Solaris

-          Rohit Talwar, CEO, Fast Future

-          Dr Jochem Hummel, assistant professor of digital innovation and collaboration, Warwick Business School, University of Warwick

Towards the end of the webinar, each panellist was asked to give some thoughts and predictions for the developments they predict to see in the metaverse in 2023. The general sense from their comments was that while there will be some developments in the metaverse, 2023 will be a year of foundation building, instead of the breakout year for the metaverse.

Talwar commented on this directedly, stating: “I think we’ll see a growth in user numbers, but I don’t think [2023] is going to be the year that the metaverse suddenly takes over."

Other panellists agreed with this, with Hall stating: “ We’re probably not going to see any big leaps forward over the next year or so.”

Hall echoed this thinking: “Maybe not big unveilings of new products or anything, but just laying down the building blocks that will allow this development to continue into the future.”

Will the Metaverse continue gaining investment and infrastructure?

While panellists questioned the pace of the Metaverse’s developments during 2023, they remain optimistic about the outputs it could eventually deliver.

Hummel expressed the hope that 2023 would see more sharing of common resources, and collaboration around these resources, in order for the metaverse to foster further interest and development. He explained: “We see all the potential that’s out there. The metaverse is what we call in research a commons environment. We have commons all around the UK. The risk with commons is that they are depletable and people start misusing it. I think it is more that everyone is aware of these risks and also worried about them.”

However regarding some of the risks associated with this kind of commons environment, he predicted that “in 2023 we’re going to see some of that regulation that will make it less risky to be in this common environment.”

Talwar noted that we are likely to see more developments in the areas of retail and leisure than in financial services, arguing: “I think  because of financial uncertainty, we won’t see an exponential growth [in 2023]. We’ll see a lot of experimentation. People are looking for some sort of edge, some sort of way of differentiating themselves.”

He furthered  that  financial services specifically is unlikely to see many leaps: “This is one of those developments, particularly in financial services, that will take a while because it’s quite a conservative industry and it isn’t being prioritised right now as a key route to revenue or a key route to profitability. So I think in financial services it’ll be a more cautious approach.”

Hummel expressed that there will be technological developments in the coming year. Hummel stated: “What I’m hoping and looking forward to is to have more immersion going on through technology. I think the acceptance of this technology is really getting there especially with the younger people, we’re now moving into generations that have now grown up with the internet.”

He argued that the trick will be for businesses that want to get people to the metaverse, is to encourage iterative work.  He stated that if businesses are able to get customers continuously coming back to the metaverse, this will be one of the best early steps in solidifying it’s place.

How are digital currencies and fraud appearing in the metaverse?

Hall expects that tokenisation will be a place of significant experimentation during 2023, particularly in the areas of digital wallet based identities and tokenisation of real world assets. Hall doesn’t believe that digital currencies, specifically cryptocurrencies, will play a fundamental role in the metaverse. Rather, he sees stronger momentum behind tokenisation of real world assets.  

The move away from cryptocurrency specifically was a view shared by Ffiske who predicted: “I firmly believe that in 2023 we are going to move away from crypto as a label slowly, and use digital assets more regularly. Simply because of the connotations.”

This is likely because of the amount of uncertainty surrounding the crypto market following the collapse of FTX and Genesis filing for bankruptcy earlier this year. However, it is also related the regulations, Ffiske stated that, “presently there’s not enough protections for people.”

However, Talwar added that: “Fraud really won’t be an issue, because the vast majority of players really won’t be doing anything that involves the exchange of money or access to accounts. It’ll be service, it’ll be information, it’ll be engagement type stuff. So I don’t think fraud is an issue and there will be way more fraud in traditional financial services like credit cards, derivatives, account theft and all those other things that are happening today. That’s going to far outstrip any kind of fraud even when you roll in the crypto economy[…] I don’t think that’s a reason not to get involved.”

Ffiske countered this point with a note of caution: “I do think fraud will get worst next year, and the reason why is because adoption is growing and growing when it comes to the technology each and every year, and as those numbers grow, so will the number of people who will be introduced into it, and therefore with the lack of protections which have been discussed, they will fall victim to it too. Comparing that to the fraud within the traditional banking sector is like comparing the size of a small tadpole to the size of a whale.”

What will we see in the metaverse during 2023?

It seems there is a lot of hope and excitement being shared about the future of the metaverse, but a hope that is not without caution. This is an extremely new environment, with technology that is currently still developing and intersecting with other markets, like that of crypto, which are not themselves the most reliable.

This year is likely to see some of the foundations laid out for a future metaverse, more likely to come from players outside of financial services which will allow the ground work to be laid for financial institutions to begin putting their rudder in for the future uses of this technology. 2023 will be a year to develop and create an understanding of what the metaverse could offer financial services. 

Watch the on-demand webinar here -> Metaverse - The potential for the financial world.