There are currently three technologies that stand out as impacting fintech strategies in the immediate future: central bank digital currencies (CBDCs), the metaverse and Artificial Intelligence (AI). Only two of these were discussed at the Paris Fintech Forum this year: The metaverse wasn’t mentioned, possibly because people are bored with it, possibly because CBDC and AI have eclipsed it. But the fact is that it needs to be part of the strategic landscape for financial services organisations.
The issue of paradigm shift in financial services is being raised again. To me, a paradigm shift means a change in business models themselves, not the refinement of existing models. In my view, the predictions of disruptive change are justified.
Many of the issues discussed in Paris were, of course, the same as those being discussed in London or New York: changes in buy-now-pay-later (BNPL) dynamics, the expansion of embedded banking and open finance, new opportunities around digital assets, cryptocurrencies (and specifically the need for their regulation), dealing with fraud and so on.
Regarding the specific issue of CBDC, the Governor of the Bank of France said that CBDCs were the fintech development that he was most excited about, and there is no doubt in my mind that the deployment of money as a platform will change the sector. There will be new products and services developed on this platform that will move value around the internet, not around banking networks, and it is impossible to imagine that such change will not impact the strategies of retail financial services organisations.
The specific issue of AI, it is undoubtedly the most disruptive technology in the sector, and my view is that the paradigm shift comes when consumers (not providers) get hold of AI has been strengthened by recent developments. It seems to me that most people, most of the time, in the not-too-distant future, their financial decisions, transactions and analysis will be performed by bots operating under the relevant duty of care legislation with the coordinated goal of delivering financial health.
Lack of discussion around the opportunities afforded by the metaverse
With the Apple AR/VR headset out there, financial services organisations should think about developing their metaverse strategies. When it came to the metaverse, I was surprised by the lack of discussion around the opportunities afforded by this new, more secure version of the internet that is around the corner. It wasn’t discussed in the venture capital (VC) panels that I saw either, which I thought was a little odd now that we are Apple has launched its augmented reality/virtual reality (AR/VR) headset, which could easily follow the trajectory of the AirPods, whose shipments roughly doubled in size each year between 2017—their first full year on the market—and 2020 (according to a person who spoke to an Apple procurement expert).
Will consumers pay for an immersive experience?
Goldman Sachs forecasts Apple’s headset sales at $18 billion per annum in 2028, a significant addition to Apple’s lineup of wearables, home devices and accessories that is currently delivering $41 billion in annual revenue. And, as the Financial Times notes, that’s without the potentially high-margin services that could accompany the hardware: if consumers are willing to pay up for the deeply immersive experiences that come with VR, software sales could eventually overshadow the amount spent each year on hardware, as they do for games consoles.
(Coming from a fintech perspective, I am not so much interested in the headsets or the 3D interfaces but the transactional infrastructure that they will stimulate and the consequent demand for financial services, Here, the recent development in generative AI may well prove to be a catalyst, accelerating development in AR/VR technologies for metaverse platforms and citizens.)
Virtual worlds, real business
While we tend to think about Call of Duty and Roblox as a way to understand what is going to happen in the metaverse, if you look at what is going on in China, the government there was also quick to get in on the metaverse, backing technologies and setting rules for the emerging cyberspace. However, while the metaverses proposed by Meta, Microsoft, and Decentraland are aimed at consumers, China’s virtual worlds are more about putting tech to work in supporting the economy. If rumours that Apple will focus on a couple of specific features to sell the concept (communications and copresence), it might well be that, as in China, it is the enterprise, not entertainment, that is the target.
The first is the rather obvious communication feature whereby you put on a headset and talk to an avatar of someone else in your field of view. The second more interesting copresence feature means someone wearing a headset can share a video of the thing they’re looking at with another person wearing a headset, and they can both experience the same thing at the same time. I can imagine engineers and doctors and, for that matter, fashion buyers making immediate use of this.
(I wish I could have used it at the Paris Fintech Forum so that my wife could have enjoyed walking past the Arc de Triomphe in glorious Spring sunshine just as much as I did.)
Banking on the metaverse
What does any of this mean for fintech? Well, it is already clear that financial institutions can develop new payment methods for the metaverse, such as consumer-focused wallets that may include cryptocurrency as well as other forms of payment, and this is a pretty good place to start. Such an approach could make consumer transactions as well as peer-to-peer payments easier, with security and lower transaction costs driving uptake.
(There’s a very good paper about this in the Journal Of Payment Strategy and Systems this month. It’s called “Metamoney: Payments in the metaverse”, and it is written by Victoria Richardson, Chief Operating Officer at Meeco Pty and… me.)
Metaverse – the next big wave?
Deloitte says that the metaverse is the “next big wave to hit”, and Rich Turrin commented on this, saying that “the metaverse is the end game for every new technology and business model banks have crammed down their throats”. I think he may be right. A safer and more secure online environment will inevitably attract transactions and therefore, financial services, even in Paris.
Related article: Past the metaverse scepticism – what will make it useful?