Hasan Fardan Al Fardan, CEO at Al Fardan Exchange, explains the potential of metaverse to shape the financial sector.
The question ‘Where do you see the future of the industry in ten years’, is one that most business leaders have been asked at some point. And with good reason. It’s a precarious balancing act predicting tomorrow’s trends, requiring both a visionary and a cautious answer.
For example, in 2008, with the economic crisis hitting the globe, millennials entering the global workforce concentrated their efforts in filling the digital void, which led to technology disrupting traditional banking and financial industry norms in ways that were difficult to predict.
Now, major financial institutions with decades of traditional banking practices behind them are routinely looking to their tech teams to drive innovation, exploiting the rise of data and new technology in a bid to secure market share or expand their footprint. A way of working that was unthinkable two decades ago, with tech staff topping the pyramid.
Which talk of innovation brings me on to the metaverse. Which, for those unfamiliar with the term is, in essence, a three-dimensional virtual universe that combines augmented and virtual reality with social media technology to create a simulated digital environment.
With the advent of Covid-19, we have already seen a transformation in everyday work practices, boosted by virtual meetings that allow disparate teams to meet in an interactive digital space. The metaverse could well offer an extension of this transformation, and a range of organisations are already looking at practical ways in which to exploit it most effectively.
Initially, the metaverse’s adoption has largely been led by traditional spheres of entertainment and gaming; however, today, more and more firms are realising that these virtual environments allow them to obtain global exposure outside their geographies, and may change the way they operate significantly.
Like all recent tech, the rise of the metaverse will be driven by consumer demand. With the evolution of spending patterns allied with VR and AI becoming more sophisticated and more entwined in our everyday lives, then it’s probably a safe bet to assume that it will only grow.
There are a number of real-world companies now operating in this virtual zone, leveraging their brand equity in online interactions to reach new audiences and impact wider groups of potential consumers. We have seen recent activations by a range of global blue-chips – from Mastercard to Coca-Cola to Gucci and Louis Vuitton.
At the moment, these activations are largely based around gamification – virtual rewards based on clothing or products from the real world, with the opportunity to earn virtual currency that may or may not be redeemed in actual dollars or euros.
The question for companies like Al Fardan Exchange is how do they leverage this virtual environment and maximise experiences for consumers living in the real world?
An obvious and immediate answer may lie with crypto. Despite recent upheavals for market leaders such as Bitcoin, it is still a trusted currency among younger consumers. If financial services companies can find ways to offer virtual crypto services, combined with real world touchpoints and tangible support backed by an established brand in the market then those that adopt early, may well be reaping the future windfall.
Which begs the question, how would that actually work? Some have proposed that perhaps those remitting money or crypto coins to loved ones and families overseas could be digitally connected in an online video chat as they make the transfer, offering the best of both virtual technology and bricks-and-mortar infrastructure and networks.
There will of course be challenges. It will require investment in the digital financial space with no real track record of success to benchmark against, perhaps leading to risk-averse companies or those lacking the financial muscle to adopt a ‘wait and see’ approach.
Another potential issue is central to crypto’s attraction for many investors – its decentralised approach. This may present regulatory issues that could slow growth in the metaverse, being viewed sceptically by many in the banking old guard who are reluctant to relinquish control.
Central banks and governments around the world are already working hard to understand the risks involved to help impose regulations on something that a lot of global consumers don’t really understand or embrace yet. This means there’s an education element to building a financial services sector in the metaverse, and it won’t be an overnight undertaking, and will again require further investment.
There are advantages too, though. For one, our location. The UAE prides itself on its forward-thinking ethos, and with many UAE firms now accepting crypto currencies as payment for an array of goods, products and services, including big-ticket items such as houses and cars, we are lucky to be located in what could be an incubator for the financial metaverse sector.
It’s still early days, with many issues to consider and challenges to mitigate, but this technology would appear to have the potential to transform our industry, for better or for worse.
I will let you know if I’m right in 10 years’ time.