It’s Like The Internet, But Safer

In 2022, the management consultants McKinsey produced a report that said that “the metaverse” has the potential to generate up to $5 trillion in value by 2030 and is simply too big for companies to ignore. More recently, Bloomberg Intelligence called the metaverse the next evolution of the internet and social networks.

In other words, “the metaverse” is a big deal and the fintech world should be formulating its own strategies to bring embedded finance to virtual worlds.

But why, exactly?

Deloitte say that:

“In the simplest terms, the metaverse is the internet, but in 3D”

but I don’t think this explains why The Metaverse is so important and why it will change the world of financial services. I would like to suggest a different narrative to explain why everyone should be developing a Metaverse strategy:

“In the simplest terms, the metaverse is the internet, but with security”.

While definitions of the metaverse may vary, what is lacking as far as I can see is an overarching shared narrative that can help inform strategies (and some short-term tactics) for new products and services that will be the basis of new business in this new environment.

So how should we go about formulating that narrative? It seems to me that central to any useful narrative about the metaverse is the issue of security. The lack of a security infrastructure on the internet and the consequent lack of what we might think of as the identity and value layer has led to no end of imperfect (and in many ways, dangerous) patches being applied without fixing the underlying problem: the internet is not safe.

(And I don’t just mean it’s unsafe in that you get emails about penis extension and links to ransomware masquerading as information from the “Microsoft Support Department”. I mean unsafe as in no-one knows what is real any more and co-ordinated inauthentic behaviour is the norm.)

It’s The Economy, Stupid?

Deutsche Bank’s October report on the subject talks about multiple metaverse ecosystems that allow interoperability through standard solutions for digital identity and asset ownership. I agree wholeheartedly and also agree with their view that the Metaverse could usher in the next e-commerce revolution as it gains traction and that “financial services firms have a significant role” in this evolution to a post-post-Industrial economy.

(By new convention I will henceforth capitalise the Metaverse to mean the superset of metaverses that will serve many different global communities.)

This e-commerce revolution will come because those standard solutions of the trading of assets between digital identities will form the security layer that was missing from the Internet because security is an integral part of what the metaverse actually is.

The specifics of the security is a discussion best left for another day, but the heart of the narrative is that the Metaverse will have a security infrastructure in it from the beginning and that is why the Metaverse is both different from the Internet we know and love and more attractive than the Internet for a great many new economy stakeholders.

This is not an ideological issue, it’s simply that safe transactions are cheaper transactions and financial services will inevitably follow those transactions.

If the Metaverse is indeed an environment with a security platform built in, and can support mechanisms to exchange assets, and establish the ownership of those assets, which we might crudely categorise as a digital value platform and a digital identity platform, then it is not an unreasonable prediction that individuals, organisations and businesses will steadily migrate their transactions from the dangerous badlands of web1 and the restrictive walled gardens of web2 in order to take advantage of that fundamental property: safety.?

Identity And Institutions

As I have written before, I think we can already see that a digital value layer, with mechanisms for the exchange of assets without clearing and settlement, is coming into existence via the technologies of tokens and decentralised finance. But for financial services we need identity and it seems less clear to me how the digital identity layer will come together, although I am optimistic that the relevant technologies will soon be deployed in institutional settings that will accelerate the shift of business into the new space.?

I say institutional because I am unconvinced that the majority of consumers will want to manage their digital identities themselves, preferring regulated institutions to do this for them. By bringing together new virtual worlds with digital objects that can be owned we can create the Metaverse – the spectrum of metaverses with specific and desirable properties – to connect people just as the Internet did, but this time safely.

Book Dave

Are you looking for:

• A speaker/moderator for your online or in person event?
• Written content or contribution for your publication?
• A trusted advisor for your company’s board?
• Some comment on the latest digital financial services news/media?