A few years ago, my 17-year-old son ran down the stairs in a state of excitement. He said he had come into possession of a special weapon from the video game “Counter Strike – Global Offensive.” He said it was worth “a lot.” My initial response was scepticism, followed by curiosity and then shock when he told me he had sold the “weapon” for over $500.

He had generated real money from something that did not physically exist. I was reminded of the film “The Matrix.” My eyes started to widen at the prospect of science fiction evolving into science fact: a new world that will see the boundaries between real and virtual worlds merge, that will enhance our experiences and provide new opportunities for commerce and entertainment.

It’s here now. We call it the metaverse.

We’ve all heard of it, but few fully understand it, or have a view on its implications for the financial services industry. Hyperbole and lack of understanding leads to distraction and dismissal – resulting in missed opportunity – something that could have cost my son over $500 and for enterprises it could be considerably more.

From an Avanade perspective, the “The metaverse spans physical places and digital spaces, enabling us to collaborate and exchange value through shared interactions and experiences”. It’s also a connected set of virtual worlds, enabled by virtual and augmented reality, 3D spaces, visualization technology, all coupled with superfast networking, that converge to deliver new experiences. Early investment is coming from technology giants, such as Microsoft and Meta, and major brands across a variety of sectors. For example, plots on The Sandbox, real estate in the metaverse, are selling for $13,000, with those near to “celebrities” selling for as much as $450,000. Football clubs, such as FC Barcelona, are exploring non-fungible tokens (NFTs) to generate revenue from its global fanbase. Retailers are selling exclusive virtual goods, only available in cyberspace.

The search for human connection
Today, in almost every country in the world bank branches are being closed. We’re moving online with ubiquitous mobile devices. But there is a lack of human interaction, and this increasing “sea of sameness” is hampering the ability of banks to differentiate. The reduced ability to connect with real people to address complex problems is a major concern.

We’re increasingly seeing the use of video technologies, including Microsoft Teams, to provide human interaction. This dynamic creates a future that allows companies to bridge the gap between the digital and physical worlds. A future that allows the building of new, but familiar, experiences that deliver on the human desire for “physical” interaction. Imagine entering a branch, without having to travel or queue, and interact with a “real” employee to discuss your financial affairs. Or imagine shopping and being able to visualise, in real time, your budget, liquidity and ability to afford the goods you like. Imagine getting a mortgage to fund virtual real estate. Or being given credit to purchase NFTs or designer goods for your metaverse’s alter ego. Imagine suddenly having access to a virtual wealth adviser. What would banking in the metaverse feel like?

The red or blue pill?
Clearly, the ability to completely blur boundaries is still science fiction, but there are still many questions. What would risk or fraud look like in the metaverse fintech? How will you move money in and out of it? How will you value assets? How will you enforce compliance? How will payments infrastructure work?

The need to protect and facilitate commerce and finance within and between the physical and virtual worlds will only increase. You can back off and watch what happens (the blue pill, if you like). Or you can dive in.

Many financial services institutions are taking their first steps into the metaverse. We’re working with some of them. This is an exciting time with many opportunities. We’d be happy to discuss how our technological and advisory capabilities can support you on this journey.

For more information, download our latest guide – Working in the metaverse: How banks can create value.