# Beyond the hype – metaverse and the future of financial services 
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-19
Category: FINANCE
Category URL: https://financedigest.com/category/finance
Meta Title: The Metaverse: The Future of Financial Services Explained
Meta Description: Explore the evolving landscape of the metaverse, its potential impact on financial services, and the role of avatars in representing users' needs in a
URL: https://financedigest.com/beyond-the-hype-metaverse-and-the-future-of-financial-serviceshtml

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![Raphael Bianchi, Senior Partner and Head of Synpulse Switzerland, Synpulse, Co-Head of Synpulse8](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/raphael-bianchi-450x449-1736815432824-compressed.jpg)

_By_ **_Raphael Bianchi,_** _Senior Partner and Head of Synpulse Switzerland, Synpulse, Co-Head of_ _Synpulse8_ _,_ _and co-author of the recent_ [_Metaverse Report_](https://synpulse8.com/insights/what-is-the-metaverse-and-why-would-banks-want-to-explore-it) _from Institute of Financial Services Zug and Synpulse8_

The idea of a comprehensive digital representation of the real world, in which people are portrayed by avatars, has existed for decades. Yet a fully-fledged “metaverse” has so far remained fiction.

Times are changing, however – and fast. [Big tech](https://www.financedigest.com/startups-spring-from-ashes-of-big-tech-purge.html "Startups spring from ashes of Big Tech purge") (Meta and Google AR), DLT companies (such as Ethereum), and the gaming industry (Fortnight and Minecraft) are just some examples of the players pushing the innovation needle forward. Together they have [brought the concept back](https://www.financedigest.com/occupational-health-and-safety-must-be-brought-back-to-the-forefront-of-esg.html "Occupational Health and Safety must be brought back to the forefront of ESG") into the public discourse, with concrete visions of what the metaverse could look like and how it could impact people’s everyday lives.

According to Google Trends data, global web searches for “metaverse” grew twenty-fold between August and October 2021 after Facebook announced it was rebranding to Meta. In the following eight months the trend among a more general audience had cooled somewhat. But within the [financial services](https://www.financedigest.com/trends-in-the-financial-service-landscape-and-the-impact-on-fraud.html "Trends in the financial service landscape and the impact on fraud") industry, there is sustained interest in analysing and understanding the future potential of the metaverse. Research recently released jointly by Synpulse8 and the Institute of Financial Services Zug explored the potential market for the metaverse economy – an industry that is predicted to be worth [up to US $13 trillion by 2030](https://www.citivelocity.com/citigps/metaverse-and-money/).

So, what do [financial services](https://www.financedigest.com/the-future-for-financial-services-is-digital-engagement.html "The future for financial services is digital engagement") (FS) professionals need to know about the current state of play? How might this shape the [opportunities it presents](https://www.financedigest.com/the-rise-of-finfluencers-presents-unique-opportunities-but-brands-must-proceed-with-caution.html "The rise of “Finfluencers” presents unique opportunities but brands must proceed with caution") for our industry, and how soon can we expect to see a mature FS ecosystem within the metaverse?

**The metaverse is an evolutionary development**

The metaverse is not a revolution. Instead, it should be understood as an evolution of the internet as we know it today. The concept builds on a shift that was already taking place following the emergence of Web 3.0, when users themselves become the content (think YouTube). That said, the potential flexibility and scale of a metaverse are much greater – it is a comprehensive, purpose-independent [virtual world that combines real-life experience](https://www.financedigest.com/the-rise-of-virtual-agents-the-future-banking-experience.html "The rise of virtual agents: the future banking experience") and unlimited creation, all underpinned by social and economic systems.

One of the defining factors of a metaverse is that it is not made up of isolated platforms. It promises greater decentralisation and thus easier [control and commercialisation of users’ own data](https://www.financedigest.com/dollar-buoyant-as-robust-u-s-data-keep-fed-hawks-in-control.html "Dollar buoyant as robust U.S. data keep Fed hawks in control"). Distributed ledger technology (DLT) can be used to strengthen ownership and disposal rights to personal data, but also to digital or digitally-represented physical goods – for example, in the form of tokenisation.

**Avatars are digital representatives with needs**

In a metaverse, avatars serve as representatives of real users. They create a new channel through which to satisfy needs based on social aspects that are common to us all – a sense of belonging, esteem, and status.

The design of the avatar therefore takes on an important function and is in [turn related to users’ purchasing behaviour in a virtual world](https://www.financedigest.com/certainty-in-an-uncertain-world-post-brexit-investors-turn-to-commercial-property-and-fixed-returns.html "Certainty in an uncertain world – post-Brexit investors turn to commercial property and fixed returns"). Participants use their avatars to project a certain image by purchasing digital goods like cars or artwork, which ultimately aims to satisfy their social needs.

It is important for companies to explore the potential of this new channel of interaction, with this quickly-evolving field making it possible to continuously [expand the range](https://www.financedigest.com/jewellery-maker-pandora-to-expand-lab-made-diamond-range.html "Jewellery maker Pandora to expand lab-made diamond range") of offerings. This also applies to the [financial industry](https://www.financedigest.com/73-of-employees-in-the-banking-and-financial-services-industries-are-looking-for-better-physical-and-mental-wellbeing-support-in-the-workplace.html "73% of employees in the banking and financial services industries are looking for better physical and mental wellbeing support in the workplace"), for which many of the products and services offered in the real world could also find use in the virtual world.

**[Financial services](https://www.financedigest.com/how-crowdsourcing-can-help-drive-the-benefits-of-advanced-analytics-in-financial-services.html "HOW CROWDSOURCING CAN HELP DRIVE THE BENEFITS OF ADVANCED ANALYTICS IN FINANCIAL SERVICES") are still scarce**

[Financial services](https://www.financedigest.com/as-hackers-declare-cyberwarfare-financial-services-cannot-afford-to-be-complacent.html "As hackers declare cyberwarfare, financial services cannot afford to be complacent") remain scarce in the metaverse, but their use-cases are growing. New means of payment have been established in DLT-based virtual [worlds by their developers to enable the exchange of goods and services](https://www.financedigest.com/uk-gives-bbc-world-service-20-million-pounds-to-support-english-language-broadcasting.html "UK gives BBC World Service 20 million pounds to support English language broadcasting"). Meanwhile, established financial institutions are beginning to create metaverse-related thematic ETFs (exchange-traded funds) – for example, [the Roundhill Metaverse ETF ($METV)](https://www.roundhillinvestments.com/etf/metv/).

The latter has also increasingly driven the development of hubs in various virtual worlds, but currently mainly only for the provision of gamified [financial information or education and not for the provision of concrete financial solutions to avatar-embodied customers](https://www.financedigest.com/disconnected-customers-are-one-of-the-biggest-problems-facing-financial-companies.html "Disconnected customers are one of the biggest problems facing financial companies"). Early engagement in the metaverse is in many cases aimed at building expertise, identifying collaborative [partners in the new ecosystem](https://www.financedigest.com/volkswagen-to-partner-on-indonesia-ev-battery-ecosystem-minister.html "Volkswagen to partner on Indonesia EV battery ecosystem -minister"), and developing hypotheses about future business models.

In the area of deposits and lending, no concrete financial solutions are offered yet. Considering that the metaverse is a virtual representation of the real world, and will therefore mirror business activities taking place today, traditional [financial service](https://www.financedigest.com/what-can-we-learn-from-financial-services-security.html "What can we Learn from Financial Services Security?") providers should begin to explore possible applications in the metaverse.

This applies in principle to all [areas of traditional finance](https://www.financedigest.com/4-areas-of-finance-you-should-be-watching.html "4 Areas of Finance You Should Be Watching"). While it might initially be difficult for traditional service providers to develop a business strategy, an early foray into the [metaverse to test capabilities is likely to leave them better prepared for future](https://www.financedigest.com/what-is-the-future-of-banking-in-the-metaverse.html "What is the future of banking in the metaverse?") adoption and trends.

**Investment opportunities for the** [financial services sector](https://www.financedigest.com/how-big-data-is-sending-shockwaves-through-the-financial-services-sector.html "How big data is sending shockwaves through the financial services sector")

Although a comprehensive metaverse does not yet exist, its potential should not be ignored – it’s an interesting time for investors who want to capitalise on the development.

Investing in relevant technologies (rather than a metaverse itself) can be a great [way for investors](https://www.financedigest.com/5-ways-that-start-ups-can-attract-investors.html "5 Ways That Start-Ups Can Attract Investors") to participate. [Since direct financial](https://www.financedigest.com/biggest-uk-house-price-fall-recorded-since-financial-crisis.html "Biggest UK house price fall recorded since financial crisis") exposure to the metaverse is often not possible, indirect investments in providers of the required technologies are an option. These opportunities largely relate to those [technologies that are required for an immersive metaverse experience](https://www.financedigest.com/how-is-modern-technology-shaping-our-in-store-experience.html "How Is Modern Technology Shaping Our In Store Experience?") but are not yet mature or have not yet reached the mainstream. Examples include investments in DLT platforms that could serve as the settlement layer of the metaverse, or in developers of VR or AR devices, avatar development engines, or NFT marketplaces.

**Further requirements needed for a broad adoption**

For the metaverse to become mainstream, certain challenges need to be solved: the infrastructure must be streamlined; a consistent system for building avatars needs to be developed; and necessary laws and [regulations should be put in place to govern the virtual world](https://www.financedigest.com/post-crash-banking-regulation-is-transforming-the-world-of-corporate-lending-for-the-better.html "Post-crash banking regulation is transforming the world of corporate lending – for the better"). A consistent global system needs to be introduced, which empowers the exchange of goods and services, and maps the value placed on different offerings.

The good news for the banking industry is that [financial services](https://www.financedigest.com/boom-or-bust-how-the-financial-services-sector-is-coping.html " Boom or Bust: how the financial services sector is coping") will therefore be a necessary part of the metaverse’s development and operation. While the opportunities are currently at a nascent stage, there is a strong case to start piloting services and technical approaches now, so companies don’t find themselves behind the curve in a few [years’ time](https://www.financedigest.com/30-years-of-excel-lence-time-to-move-on.html "30 YEARS OF EXCEL-LENCE: TIME TO MOVE ON?"). This testing period is also a vital part of encouraging the investment and focus required to scale up a ‘true metaverse’ and tackle the challenges outlined above. Only when these requirements are met can the immense potential of the metaverse be realised.


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