AIA recently hosted a staff town hall in a virtual-reality environment provided by Microsoft and Hololux, a German vendor of digital strategies for workplace collaboration.
The insurer envisages combining online and offline (physical) experiences for its agents. COVID-19 was the trigger. “If agents don’t have other capabilities during pandemic waves, they lose out,” said Patrick Lam, chief technology officer and head of information technology at AIA for Hong Kong and Macau.
“We have the biggest agency workforce in Hong Kong and Macau, and this technology will drive change. This is the future,” Lam said, speaking at a fintech conference on 12 October organized by Accenture.
The insurer’s town hall (pictured, main image) was a response to COVID-related social restrictions, and the VR aspect was meant to be brief and entertaining. The tech isn’t ready to provide a sustained environment in which to do business.
The metaverse experience is also awkward: avatars lack legs and float around with disembodied hands. Looking at clips of the AIA event on YouTube, it already feels like a video game circa 1982. Which suggests today the concept isn’t ready – but that plenty of improvements are coming.
But Lam says even this limited interaction is yielding results. “Right now the metaverse is just a presentation,” he said, “but it’s powered by data.” That data, with increasingly sophisticated analytics, has the potential to deliver new insights that a business can use.
Defining the metaverse
The metaverse is a buzzword that is hard to pin down; definitions vary, particularly if it involves blockchain infrastructure that facilitates NFTs and digital assets – then it’s Web3.
Moski Mok, managing director at Accenture, says a better way to think about it is what it lets people do. “The metaverse enables people to move away from web browsing into participating or inhabiting experiences that combine the physical world and the virtual world. It’s the next evolution of the internet experience.”
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It should be an experience that is persistent – always on, like the internet – and live. That level of metaverse doesn’t exist.
For now, at best, it is just another channel, along with desktop, mobile, offline, etc. It is not ready to replace existing digital channels. But financial institutions are beginning to play around with it.
Follow the people
Dominic Maffei, who heads up Hong Kong for SC Ventures, the corporate and venture investment arm of Standard Chartered Bank, says clients are pushing firms to get involved.
“Being a bank in the metaverse can be seen as risky, but we can’t help our clients risk-manage in this space if we don’t understand it,” he said. SC Ventures has ‘land’ in The Sandbox, a commercial VR platform. “It’s about brand building and understanding the technology, getting credentials, and understanding problem statements such as digital identity. Identity is a huge problem in the metaverse for banks.”
Hang Seng Bank is also engaged in multiple pilots, from minting NFTs as rewards for premium customers, to developing a proprietary metaverse that simulates a day in the life working at the bank.
“This is designed to attract new talent to help the bank drive innovation,” said Kim Lay, managing director and head of digital banking. “Candidates can use our metaverse to understand our history and the daily working life.”
She says the bank has also teamed up with Regal Hotels to build a ‘green city’ in The Sandbox. “This will show our ESG thought leadership through interactive games,” Lay said.
Regal Hotels is partly owned by AMTD, which also owns fashion media L’Officiel, and has announced its own plans to develop metaverse experiences. (AMTD also owns DigFin.)
According to Lay, the real benefit is to learn how to collaborate “to bring excitement in the virtual world and back to the real world.”
If you build it, will they come?
Gokul Hariharan, managing director at J.P. Morgan and co-head of tech, media and telco research for Asia Pacific, says the first market for quasi-metaverse experiences is gaming, with a few platforms like Roblox attracting upwards of 3 million users daily; the game Fortnite offers virtual goods such as concerts.
“These things are still ‘nice to haves’,” Hariharan said. “They’re not truly immersive. They’re still trying to attract consumers.”
Indeed, the two leading VR worlds, The Sandbox and Decentraland, still have fewer than 1,000 daily users, combined, according to Coindesk. The NFT market has also collapsed: daily trading volumes on OpenSea, the leading NFT marketplace, hit $2.7 billion in May, but have crashed to $8 million in mid-October.
Hariharan says reversing this plunge will require advancements both in the hardware – who wants to be strapped to a bulky oculus all day long? – and in the content available.
“If we engage customers without content and substance, then they’re not engaged, they’re bored,” AIA’s Lam said. “How to make this happen, and keep interest sustained? That’s hard.”
That iPhone moment
Hariharan says more gaming companies are dedicating resources to augmenting existing games as well as to creating ones that are VR-native. He sees the hardware and the content coming together in the next three to five years – maybe or maybe not including a Web3, crypto element.
But for these developments to scale, the metaverse needs an innovation on par with the mouse for PCs or the iPhone for mobile internet. “We’re still waiting for that iPhone moment with a truly immersive experience,” he said.
This is the goal for Big Tech players like Meta, which so far has spent $15 billion in the past year on its Reality Labs venture. (It’s still trying to give avatars realistic legs.)
Although VR spaces may be mostly bereft of users, virtual goods are becoming a real business, with annualized transaction volumes nearly $60 billion, and set to grow by 10 percent to 20 percent, J.P. Morgan says. Once the tech improves, the space can grow kinetically. For financial services and fintech, building the payment rails is an obvious infrastructure goal.
“The opportunity for many companies is the back end of the experience,” Hariharan said. “We need interfaces between the traditional digital infrastructure and something that is persistently virtual.”
Questions for financial services
There are today more questions than answers for financial institutions.
The biggest one (and the most difficult) is how to build a metaverse that does a better job than the ‘Web2’ internet in terms of protecting user data and managing identity. The original internet emerged at a time of little to no regulation, but we’re not in the 1980s, and should not expect regulators to give entrepreneurs a completely free hand. Big Tech, fintech and crypto, gaming companies, and enterprise vendors have their own visions of the metaverse. What will be the rules of the road – and who will determine them? (And will it interoperate with China’s own concept of a crypto-free, state-guided metaverse?)
For financial institutions, the second obvious question is what’s their purpose in the metaverse? Is it just another channel to promote traditional banking or insurance products? If so, who’s going to attract people to where the banks are building their marketing spaces, and why will they be there? If it’s more for corporate social responsibility, HR, or training, then is the cost worth the build? If it’s augmented reality to enliven a traditional transaction – say mortgages – then what are the right partnerships to make it material feature? Don’t forget the regulators!
Third, what data will be generating in the metaverse that banks can use to derive insights that drive business? The metaverse offers a way to watch customers interact with one another. Who’s going to transform that into something commercially meaningful? With respect to the ‘rules of the road’?
Fourth, what currencies will be used in the metaverse? Assuming a Web3 version, the crypto industry thinks it should be a platform’s native token, or something like bitcoin. But for banks, the answer is more likely to be a regulated stablecoin or a central-bank digital currency.
New thinking, old models
One way to think about this that the metaverse, particularly its Web3 manifestation, will not just be about delivering a customer experience, but giving those customers an active role in that experience.
The creator economy is the most-cited idea: a content creator (musician, artist, etc) doesn’t just upload stuff to Facebook and lets Meta monetize their data. In Web3, they can earn money on their work via blockchain infrastructure. Take this further, a merchant could not just use a Shopify or WeChat platform to sell, but could also keep or sell the data they create on that platform, rather than just giving that away to the Big Tech operator.
But this ‘sharing platform economy’ notion is a long way from a business case. Meta sank $15 billion into Virtual Labs because it expects a big economic return; VCs back crypto projects they think will achieve chokepoints in the virtual world. Who’s going to write a big check for a mutualized society that can’t even monetize the user data?
For those financial institutions that are experimenting with the metaverse, they can see the potential of the technology. It’s got a powerful community element, and retail-facing firms need to be embedded in their community. There’s no question that financial services is a vital element to a functioning metaverse.
For now the easiest question to ask is whether they work with others to build things for a public community, or hire vendors to build a proprietary one. Unlike all the other aspects of the nascent metaverse, this is one decision that financial institutions can control.