Money and the Metaverse: A New Frontier for Banking

Atul: So Metaverse is the new technology on the block and it has become top of mind for companies and leaders across industries with newer innovative use cases being explored. And one industry vertical that has been at the forefront of adopting newer technology is BFSI.

Meta banks has become the talk of the town after banks like JP Morgan, HSBC, Standard Chartered, UBI, and others jumped into it. For banks and financial institutions to keep up with the current digital transformation, they turn to a new core competency Embedded Fintech, which is the integration of Fintech products and services into financial institutions, native product sets, digital channels, and business processes. It might emerge as the next big thing, but are the incumbents ready to ride this way of digitalization. We will go deeper to explore these areas in today’s session.

Hello everyone and welcome back to another exciting episode of Zinnov podcast Business Resilience Series. I am Atul Srivastava, Engagement Manager at Zinnov and I will be your host for this episode today. I have with me Girish Raghavan, Vice President of Global Services at Fiserv. Girish is an Engineering leader who has patented applications and headed global engineering teams.

At Fiserv he enhances customer experience through digital transformations, cloud adoption, and modernization. In this episode, Girish will shed some light on its perspective on Metaverse and how the BFSI sector is looking to leverage the technology. Welcome Girish, it’s a pleasure to have you with us.

Girish: Thank you, Atul. It is great connecting with you. Looking forward to a very interesting discussion.

Atul: Same here, Girish.

So Girish, you have had quite a journey in your career from Yahoo to Fiserv and that’s quite a trajectory, I would say, and shift from a technology and business perspective. What have been some of the highlights and observations as you have seen in the tech industry changes, maybe in a flavor of Fintech?

Girish: A lot of things. Because if you really look at it, from a perspective of what has changed in the Fintech, digitization has become a forefront. Even if you look at pre-pandemic time, you didn’t have… digitization was being spoken of in pockets. Now I think digitization is mainstream. That is one of the biggest change I have seen potentially from the Fintech perspective.

The second thing is the kind of acclimatization of technology and which gets ingrained. So one of the things you would see is that now IT is no more a side show for a financial business. It is as much as a core as your business. And these are two dramatic changes which have really changed the contours of the industry in the last few years.

And I think with coming of Metaverse and associated concepts, the trajectory is only forward from where we stand today.

Atul: Thank you for sharing your experience, Girish, and giving a good start to the podcast. Switching gears to the topic of the moment now, the Metaverse. So the Metaverse has garnered attention from enterprises, consumers, Fintech companies, and hyperscalers alike.

Who do you think that the Metaverse is for? Do you think it is inevitable for companies to move into the Metaverse to stay relevant and futureproof themselves?

Girish: A great question and a very interesting aspect you bring in. And to answer these questions, let’s just look at it little more broadsided.

If you really want to analyze where Metaverse is headed and for who it is, we have to analyze it in three terms. What is the value it brings in as a concept? Second thing is, is there a sufficient interest and enthusiasm to drive the momentum? And obviously the last thing is, is there a sufficient financial backing which will take this momentum and sustain it?

So if you really look at it as a concept, Metaverse is for everyone. What is Metaverse? The easiest way to visualize is it is a kind of a set of connected virtual worlds which allows people to play transact, interact, socialize, collaborate, and get entertained. And this is kind of an applicable to everyone.

And each of us do this, both in our personal life and professional life. And one of the things pandemic has proven to us is the resistance to digitization has come down significantly and people are enthusiastically adopting digital.

And Metaverse is a digital medium to facilitate it. And so as a concept, it will be for everyone, it applies transcend segments, and user basis across the board. The second thing is that for any kind of a paradigm to sustain there should be sufficient interest and enthusiasm. And I think a lot of interest in enthusiasm picking up across the board.

The second thing is I was reading a survey report where it’s was said that about 60% of the people surveyed were either interested or are already adopted or enthusiastically looking at adopting Metaverse in one form or another. We have now 50 million Active User in Roblox, 2 million registered user in Sandbox.

We have case studies upon case studies in business-to-business segments, like, BMW experimenting with digital twins. These are all kind of a testimony to the fact that various business segments both across the consumer space and the enterprise space are exploring Metaverse and investing in it.

And that shows the level of interest and enthusiasm. The last part of the puzzle comes with the financial backing. I was reading a recent study from McKinsey. It said that the financial opportunity in Metaverse will probably touch about $5 trillion by 2030. And the first time when I looked at it, the numbers looked astounding.

Just look at what has happened in last two years. I think overall in 2021, we had about $57 billion being invested in Metaverse and associated concepts. And in first six months of 2022, we are already topping $120 billion. But having said that, we are in a very early stage of Metaverse. It is being defined and refined as we speak. It’ll go through its hype cycles and there will be ups and downs, but personally, I see a lot of positive momentum around Metaverse and it’ll transcend across industries and transcend across segments and it’ll impact both our personal life and professional life.

Atul: Those were some really great insights and perspective, Girish, and I think you rightly touched upon some of the consumer Metaverses like you talked about Roblox or Sandbox and their active users, the investments across the startups, ISVs, and all. And I think that’s all coming up to fuel the overall market of the Metaverses.

If we had to get more specific and look at the finances, how will the Metaverse transform the relationship between banks and their customers? Because at this point of time, when I see different use cases majority of them are focussing on the customer experiences.

So will there be any big impact on customers by banking in the Metaverse and what would these be in terms of overall revenue realization or maybe in terms of just enhancing the customer experiences?

Girish: So look at it this way. One of the things which is happening in banks and almost all the entire financial sector is that impetus around digitization.

What started as a digital transformation has now ended up as digital acceleration. Almost every customer touch point now has a digital footprint. The knowledge of us for us as a bank is through a website or a mobile app. Which is great and it has made the entire customer touchpoint very effective and efficient, but like everything in life, there is no free lunch.

I think that trade off has been as a kind of a human element which was ingrained as part of your financial interaction. Let me tell you a personal story. I still remember that day when I opened my first bank account as a 16 year old. My dad had taken me to one of the neighborhood banks, because at those days you needed an introducer and I went there. The bank manager essentially sat me through, talked to me about it, gave me what used to be the passbooks which we used to get those days and also give me a kind of a good insights into why saving is important and it was a personal touch there. And it made you feel really special and you really cherish that memory.

And even after all those years, I still remember it and believe me and probably I still have that relationship with the bank because of the emotional connect with that. And I think Metaverse has aspect to fill that void, which has happened between digitization and the lack of personal touch.

Because one of the things Metaverse will start inculcating is the concept of real time interactions in a typically an asynchronous mode, which digitization has taken me. And I think bringing back that human element and relation building is very imperative to a financial institution and their business because at the end of the day it is a relationship-based business and Metaverse will facilitate that.

And honestly, I don’t think this is so far fetched. And, even as we speak Kookmin Bank, one of the largest in South Korea is already experimenting with how do you enhance customer experiences using the virtual world.

The other area where I think banks will have a huge opportunity to leverage Metaverse will be in the learning, training, and knowledge sharing. The attributes Metaverse offers is kind of a natural fit to this domain. I think, sooner than later, I expect many of the players in the financial industries to be leveraging Metaverse for their skill upgradation program, knowledge sharing program, learning and training modules, and everything. I see a lot of potential around finance.

Atul: I think you’re rightly touched upon not only the customer experience, but as you touched upon the education and learning part, which could be how to enhance the employee experience as well.

So I think that’s a really… beautiful concept around this. So now from a growth perspective, the expanding economy of the Metaverse is said to be a new source of revenue. And you also mentioned some reports that highlighted the overall TAM opportunity for Metaverse. Even our recent report that we published on Metaverse, it also says the overall TAM for enterprise Metaverses could be close to $6 trillion by the end of 2030. So if you see this concept, banks will have the opportunity to ensure and lend against crypto currencies or let’s say NFTs and virtual real estate. This will expand banking abilities as you know them today. So how will banks leverage this chance to expand their brand, in your opinion?

Girish: What do you say is true, because cryptos, NFTs, virtual real estate will be kind of the foundational elements for many of these interactions. But take a moment and step back. What will Metaverse open up?

In my view, I think it opens up three kinds of massive economic opportunities. I think it is going to fuel in a whole big bunch of content creation economy where you have to create so many assets. The second thing is once these assets are there, you need to have a kind of a rate or a transaction-oriented economy.

And the third aspect is that there is going to be a huge impetus on seamless shift between the real economy and the virtual economy, because I think at the end of the day, these two are going to compliment each other and will not stay in isolation. So all these are massive economic opportunities and who are better positioned to leverage this than banks and financial institutions?

And they are going to bring in lot of new products, solutions, and services, which essentially facilitates a combination of all these three or one of those three things. And that’s where I see the world heading to. And like, I think I said previously, what Metaverse is basically a mechanism where people can socialize, play, get, enter, time, collaborate, interact. The underlining fulcrum for all these things is commerce and transaction. And banks will continue to be one of the important constituents to play on this segment and there will be new products and new solutions that will be launched, existing products and existing solutions that will be refined to cater to this demand, but the opportunity immense. I think we are just scratching the surface at this point.

Atul: Even, you know, Girish, once we started studying about Metaverse and how industries like BFSI will be impacted out of this, one basic question on everyone’s mind was why banks are moving to these decentralized platform like Roblox , Sandbox, or Decentraland?

I think, as you rightly touched upon the product and services, the new product and services, but at the same time how the existing product and services will be reimagined or maybe re-customized for the newer customer. I think that’s really an amazing explanation for this.

So now to my last question for the day, Girish, what kind of role will neobanks play within the Metaverse? Because we are seeing a mushrooming of these neobanks across the globe, will they explore newer use cases than traditional banks? What are your thoughts on it?

Girish: Look, the classical definition of neobank is essentially having a digital presence and which essentially don’t have branches. Before I even touch into banks, we have to probably step one step backwards and look at what does banking invariably offer in this new world.

At the end of the day, banks are probably one of the most important intermediaries in any well functioning economic system. They essentially facilitate lending by ensuring credit availability, they maintain liquidity, they essentially ensure seamless transmission of money and overall bringing a point of encouraging entrepreneurship.

I think we all realize that banks are probably one of the primary mediums to realize and implement your monetary policies objectives. So none of this is going to change in the virtual world.

I think banking as a domain is sitting on a sweet spot for this and neobanks being the new entrants will probably be the primary mover. And the second thing, what will happen is that they will be the primary enabler for making sure of the social interactions directly leading to commercial transactions instantaneously.

And I see a lot of experimentation and new product offering coming from the neobanks around these areas. I think one of the things is Metaverse is not going to be a monolith, Metaverse will be a collection of virtual worlds. And one of the things which will be needed is easy interaction across this virtual worlds and which would essentially mean, two or three things – standardizations of interactions, identification across the board. And I think neobanks will essentially help and facilitate the early adoption and defining some of these early standards around these things.

Atul: Right. Got it. And Girish, as you mentioned neobanks could be the early movers into this space. At the same time, do you think that these neobanks will need some kind of relationship with the traditional banks as well in the long run?

Girish: Look at it this way, I think the greatest opportunity that exists now is kind of using the identity between your real life and your virtual life. You want to seamlessly transcend across these two segments.

I think that boundaries will become lot and lot more porous as we evolve on the Metaverse space. And where is your identity and whole of your financial identity currently existing. It is existing in the traditional banks, but for you to really create a compelling value proposition is that there needs to be fusion of these two things together.

And that’s where I think that will be a symbiotic relationship between both these players and without that it’ll become probably very isolated and silo-centric approach.

Atul: Perfect. And that brings us to the end of episode. Girish, you have shared a lot of good insights and I think the banking industry has come a long way, taking a new technological lead by taking banking to the Metaverse, in turn easing the process for customers further and foraying into the digital cosmos of Metaverse, the banking industry is endeavoring to keep pace with, I would say that rapidly evolving technology and be future ready.

And new digital expectations have been fastened onto the banking industry as well and it has begun to indulge them recognizing the tremendous potential that this emerging immersive tech Metaverse has to offer. Thank you, Girish, for sharing your perspectives and opinions with us about Metaverse and its unexplored potential. As consumer patterns change, it’ll be interesting to see how some of today’s themes will unfold over time and impact the tech ecosystem as a whole.

Girish: Thank you, Atul. Loved this discussion and looking forward to connecting with you sometime sooner and diving deeper into this.

Atul: Yes, yes, definitely, Girish. So that’s all for today.