Any conversation about the metaverse should probably start with a definition, and the understanding that it may take several definitions before the entire picture comes into focus.
Immersive experiences. Connected virtual worlds. Deeper interactions enabled by technology but not limited to a specific piece of hardware.
All of these elements work in concert to define a term first coined in 1992 by
But even after you wrap your arms around the concept, that does little to explain how wealth managers and other financial services organizations — among the many industries grappling with the new technological landscape — should leverage it for success. Or why
While
And recent consumer studies show that while the average person is interested in what the metaverse may one day become, general understanding remains low and enthusiasm limited by three tethers forever, and perhaps unfairly, linked to the term: video games, VR headsets and Mark Zuckerberg. If you're not into one of those, you may hand wave the metaverse as something that simply isn't for you.
So for many wealth management firms taking a look at technology, where it's heading and how much they should invest today, the metaverse really has one true definition — multibillion-dollar maybe.
"We definitely don't know the results yet. This is an in-progress activity. But one of the things I kind of view the metaverse as is the next step," said Rob Krugman, chief digital officer at
"I do think whatever happens though, financial services will be part of it. Because at the end of the day, we're going to want to transact. And when we're transacting, we're going to need financial services to facilitate those transactions," Krugman continued. "I think as soon as that happens and people decide that this is where they want to function and work and where they want to do things, It's naturally going to be extended to advisory related services."
From concept to clarity
A
The analysis goes on to say that a version of the metaverse that meets the definition does not yet exist, "though many of its components do, as does an increasing aspiration to create it."
Report co-author Ian Hughes,
His roots working with metaverse-style interactions date back to the mid-2000s when he worked as a metaverse evangelist for IBM and helped bring a
Hughes says much of the hate-it-or-love-it reaction is tied to hardware. Virtual reality headsets have become synonymous with the metaverse concept despite not being a prerequisite for its consumption.
But Hughes, who discussed the new S&P report during a March webinar, said VR headsets are actually obscuring both consumers and enterprises from seeing the real metaverse vision.
What was once centered around self-exodus has evolved into something built on the concept of greater connectivity.
"Back in 2006, people engaged in virtual worlds stuff and metaverse stuff trying to escape the real world. Take
According to the S&P Global report, emerging metaverse opportunities in video games, hardware, commercial software, e-commerce, advertising and other segments will produce $52.39 billion in annual revenue by 2027. Video games are expected to drive 41% of the annual metaverse revenue by the end of the forecast period.
The money started flowing more rapidly during the pandemic. According to S&P Capital IQ data, metaverse companies have been the target of $57.41 billion of announced or completed transaction activity in debt capital markets, equity capital markets, rounds of funding, shelf offerings and M&A since 2000. More than 80% of that investment has emerged since the start of 2020, according to S&P.
That's a far cry from a
McKinsey estimates that by 2023, the metaverse may have a market impact of between $2 trillion and $2.6 trillion on e-commerce; an impact of $180 billion to $270 billion on the academic virtual learning market; a $144 billion to $206 billion impact on the advertising market; and a $108 billion to $125 billion impact on the gaming market.
Accenture believes consumer and business interest in the metaverse as a creator economy and tool is expected to fuel a $1 trillion commerce opportunity by the end of 2025,
According to the Accenture research, 55% of the roughly 9,000 consumers surveyed see the metaverse as a business opportunity for creating and monetizing content. Most (89%) of C-suite executives also believe the metaverse will have an important role in their organization's growth, according to a parallel survey of 3,200 of them.
Back to reality
Eye-catching figures aside, McKinsey's probe acknowledges the concerns around the longevity and potential of the metaverse, noting that an extreme view regards it as merely a rebranded gaming platform of little interest outside of that sector.
"We do not share that skepticism and believe the metaverse has the potential to be the next iteration of the internet," said the McKinsey report. "It may seamlessly combine our digital and physical lives by featuring a sense of immersion, real-time interactivity, user agency, interoperability across platforms and devices, the ability for thousands of people to interact simultaneously, and use cases spanning activities well beyond gaming. But the pace of its development will depend on multiple technological and user-experience factors, and is not limited to one platform, device, or even technology."
The skepticism McKinsey addressed back in summer 2022 has only increased in some circles as other hyped but difficult to define future-tech like cryptocurrencies and NFTs
Add happenings like Meta CEO Zuckerberg saying in mid-March that
Companies like
Still, there is a future for the tech if it can manage to break the misconceptions that hinder it and lean into its position as a natural evolution of tools we use today.
"There are going to be some people that are going to say, 'nope. Not for me.' That's totally fine. But there's going to be a large group of people that are really into it … and I think that's what's going to drive financial services firms to get involved," Krugman said. "We've seen a little bit today. We read about JPMorgan opening up bank branches and Fidelity playing with different games. And they're experimenting right now. I'm sure they don't know the outcome, just like we don't know the outcome. But what they're thinking is, if we can get a foothold here, be the banker of choice or be the wealth provider of choice for people who live in this space, and help them to do the things that they like to do, why not?
"The question becomes, where does it start in financial services? I think it probably starts in banking. It's a little bit more retail focused. And that's been the history of financial services," Krugman continued. "I always joke that banking starts. Five years later, the wealth space follows. Five years after that, insurance gets involved."
Beta testers
The financial services metaverse still has plenty of virtual real estate to be claimed, but as Krugman points out, a handful of big players are testing the waters to see what ideas stay afloat.
In early 2022, JPMorgan
The lounge's grand opening also coincided with a report from JPMorgan explaining the
A couple months later, Fidelity Investments opened its first immersive metaverse experience called
In November, a
The most recent attempt comes from TD Bank, which in late March announced a partnership with
Students received virtual reality headsets, created their own personalized avatars and have been participating in a variety of 3D immersive programming including networking sessions, live leadership panels, innovation challenges and lunch-and-learn discussions.
"Really, the idea was to enhance the onboarding experience, offer new ways to connect with their colleagues and peers, but also embrace the bank's culture and eventually also increase the retention of these resources," Plante said.
Capco also recently shared the details of an initiative with Deutsche Bank
The challenge for Wandel, which is the German word for "change," was bringing a globally dispersed, 2,500-person operations team together. In just 10 weeks, Wandel went from concept to delivery, and the two sides planned a week of activities, experiences and events designed to help employees get to know one another better, transform the way they work and gain valuable insights.
The virtual space featured an expo hall, outdoor plaza, individual meeting room and a kudzu goat that visitors could pet.
Wandel ended up attracting a total of 1650 visits during a weeklong program of events with a total of over 450 hours spent in the space. According to Capco, participants walked approximately 2,300 virtual miles — the equivalent of London to Croatia and back — during that time.
"Immersive experiences can be a game changer for how we learn, collaborate, and engage. Both as a bank and with our clients," Mary Hynes-Martyn, managing director of Ops Transformation at Deutsche Bank, said in a statement. "It was great to see strong engagement with this new, cutting-edge technology."
While the TD Bank effort did require the use of VR headsets, the Wandel project is an example of a metaverse application that can be fully experienced on multiple devices. Wandel had browser-based entry, meaning if you could get online, you could get in on the fun.
Hardware agnostic
Sandeep Vishnu,
"For the metaverse to get beyond a niche phenomenon, they have to increase accessibility. So browser-based access is going to be very important for this to have any kind of widespread adoption," Vishnu said. "Now, I personally would think that both channels are going to exist, just like when we saw the development of online banking. First it was available only through our web browser or an online site. Then it became available through mobile and on tablet. So multichannel access. Similarly, there will be multichannel or multidimensional access into the metaverse. You could have a browser-based access that allows you to maybe observe and partially interact. But for a richer and deeper experience, you will need something like a headset or something else that will enhance augmented reality."
That desire to be hardware agnostic is at the heart of
Kenneth Landau, CEO and co-founder of Mytaverse, said the organization began as a live event company. But when the pandemic temporarily deleted the idea of live events from reality, Landau and fellow co-founder Jamie Lopez pivoted their tech and know-how into developing virtual meeting spaces for business entities.
Like Wandel, Mytaverse does not rely on a headset to work. Instead, works to take the connectivity experienced in an application like Zoom to the next level by encouraging active participation.
"We see so many platforms that are 2D that are very far from connecting people. They are actually doing the opposite," Landau said. "They're bringing people into a place where they can talk. But they're not really connecting. They're talking and they have their cameras off. And everybody's doing whatever their 'multitasking' is, but they're not focused on connecting with the person on the other side."
Landau said working with PepsiCo, one of Mytaverse's largest clients who has
"Zoom, which is the platform they were using for all types of events, would yield a 12% per hour loss of internal participants. But we lost less than 1% in eight hours," he said. Transitioning to the financial world, Landau said Mytaverse recently did a ground-breaking event with French international banking group
Securities Services at BNP Paribas hosted the event
"And the people that were inside the platform, they were having a blast. And they were seeing digital assets of BNP Paribas and they were dressed in BNP Paribas gear. So they felt as if they were in their own space. That makes that connection even stronger," Landau said. "We cannot lose perspective of the fact that Zoom changed the way people were able to interact when COVID hit. And that's a fact. Another fact is that people are bored, and they start doing other things, and they've started disconnecting or not engaging. And that's where these technologies come into place."
Vishnu said predicting the speed of metaverse adoption is difficult, especially when the best use case in wealth management remains to be seen. Will wealth managers five years from now be taking advantage of more developed metaverse tech to interact with customers? Or will it be more viable as an internal training or firm culture play, similar to what's been seen with entities like TD Bank, JPMorgan or BNP Paribas.
"What I think will happen is that the metaverse will start creeping into our day-to-day lives in ways that we don't even fully understand. It's not a monolithic entity. It is going to manifest itself in many different ways," he said. "For example, with ChatGPT and AI starting to proliferate, how is that going to impact the metaverse? Right? That's a generator of content, and the metaverse is heavily content dependent. So will that start to create different mechanisms into the metaverse? I think that's what's likely to emerge."
Plante, meanwhile, believes that wealth managers and other financial services firms have decided to take a pragmatic, thought-driven approach to selecting metaverse use cases. There is no rush to beat the competition because the clear path to success has yet to be forged.
"The idea then is to be able to pick a use case that they can quickly implement in their first iteration to confirm that it benefits at scale before they develop it further," Plante said. "That's why we've seen a lot of collaboration, a lot of advanced learning and development use cases, and more broadly the internal use cases at this point. Because while those use cases bring value to the workforce more in the back office, they still bring value."
A future to be crafted
Ambivalence from the average consumer and fresh backpedaling from major players make it hard to gauge if the buzzword will still be buzzing when the supporting technology reaches maturation in three to five years as predicted.
There's also the reality that thus far, no business-backed metaverse rollout has been truly awe-inspiring.
The 3D worlds are still raw and primitive in many respects — similar to the Geocities and Angelfire webpages of yesteryear that have given way to feature-rich browsing experiences we have today; or the '90s-era forums and message boards that walked so that multifaceted communication platforms like Discord could run.
"With respect to consumers … are we going to be dragging them along? Or are they going to drag us along? And the reality is, it's a little bit of a mixed bag here." Kingstone said. "When we do look at this, we have to understand and guide businesses and consumers about what it means. Our research also suggests that businesses are really looking to embrace more of the Web3 innovation around interactivity and immersion and immersive experiences. Well, that's a lot of what the metaverse is going to bring to the table. (And) consumers need to understand more about the value and what the value proposition is for them before they understand how to use it."
Kingstone said when analyzing business goals related to the metaverse, many companies say their interest isn't driven by an opportunity to create an additional source of revenue in the near term. Instead, it's about brand awareness and customer loyalty.
To provide an example, Kingstone highlighted Apple, saying it doesn't rely on consumer data because it is more concerned with "creating the market" rather than chasing the trends.
"And it isn't about future proofing your business yet today. It is about creating these use cases so that we can start understanding and testing what we can do in this new world," she said. "Businesses are jumping in, but the majority of consumers are still on the fence. Only 16% of consumers are very interested, and 36% are on the fence. It's not unusual. There's nothing to be concerned about here. This is typical consumer behavior. Until they understand how this is going to impact their lives for the betterment of their own lifestyle, they're not going to jump in."
Who has the best idea?
Landau believes there is a great opportunity to drive future engagement and value in the wealth management metaverse through the use of "digital twins," which are
"In financial services, the most important asset is people. I mean, you're talking about how can I get in front of my customer and have a deep connection, because at the end of the day, if you're going to trust your advisor or you're going to change the financial service company you're using, you need to have a connection with that person," he said. "Other than being face to face, there is not really a good way to do it until what we're seeing right now with the metaverse."
Landau said bringing digital twins of places that are iconic to a firm and its legacy into the metaverse can create a sense of connection and attention lacking in current forms of business-to-consumer communication.
"Clients and potential clients know about those spaces. And they will feel very close to them if they are inside those spaces having a conversation. So digital twins become an important part of the conversation," he said. "If I can be having this meeting in your iconic Hong Kong building, I will feel very good about that conversation just beyond the fact that I'm talking to the financial advisor or the vice president or the CEO. And do it in a place that is meaningful for everyone around."
Still, the metaverse conversation in wealth management is one rife with what ifs, maybes and unknowns.
But for Krugman, the unknown maintains its excitement when we realize that the rules of how to conduct business in the metaverse will ultimately be decided by whoever has the best idea.
"I think it's important to step out of financial services a little bit and think about real-world experiences. Take the Super Bowl. What if the metaverse goes to a place where it's not simply avatars and stuff that potentially look like us. But what if it's really us? What if I'm able to go and sit in the stadium in Arizona and watch the game from the 50 yard line?" he said. "And when I'm there, I want to buy a hat. I want to buy a shirt. I want to communicate. I'm there with other people so we can enjoy the experience together. There's been a lot of concerts in the metaverse, and it's a fascinating thing because it's really about building a social community together.
"And what some people are failing to recognize is the visualization aspect of this. The reality is, financial services products are complicated. I was with a broker yesterday talking to them about this. The problem with the way we communicate today is that in most cases, it satisfies regulatory obligation. It marks the checkbox. But what it really should be about is providing context to the individual about what this means to them."
Krugman then takes a typical advisor meeting that involves a professional showing a client charts and documents and hoping that they follow along, and remixes the scenario with a fully evolved metaverse at the advisor's disposal.
"The information comes to life. And I, as a client, can ask questions. Maybe those questions are being answered by AI so that the advisor doesn't have to do all of that heavy lifting," he said. "We should be thinking about the experience first. People often think about how to use this to make money. But how do we deliver a better experience for the customer if we do things this way? I do think about the financial advisory relationship. And so much of it is around building trust with the customer. And one of the challenges is the way that we present information back to customers is not great.
"You got a 3% return. What does that mean? Is it good? Is it bad? The truth is, I don't care. You know what I care about? I care about what my goals are. I want to retire at 65. I want to buy a second home. I want my kids to go to college. Those are my three goals. How am I doing compared to those goals? I don't care about anything else."
