What Is The Metaverse and Why is the Financial Sector Embracing It

What Is The Metaverse and Why is the Financial Sector Embracing It

by September 14, 2021

The metaverse, a combination of “meta”, meaning beyond, and “universe”, has rapidly emerged as a major trend for companies around the world, a growth that’s been fueled by the global pandemic, lockdown measures, and the boom in cryptocurrencies.

In South Korea, financial firms, including brokerages, banks, credit card issuers and insurers, are jumping on the bandwagon, fast embracing the concept to appeal to younger generations.

An August 2021 report by the Korea Times shows that brokerage firms and banks are actively building virtual environments for their customers. For example, NH Investment & Securities, one of the largest securities firms in the country, is currently preparing to launch its own metaverse platform, which will provide a virtual space where up to 2,000 customers will be able to simultaneously interact and tap various services, such as investment analysis seminars and games. The platform could go live as early as the end of September.

Similarly, brokerage firm IBK Investment & Securities has partnered with MetaCity Forum, a blockchain-based metaverse, to help it launch its own platform and provide virtual financial services within this new virtual ecosystem.

A number of Korean banks as well are preparing their own metaverse offerings, with perhaps Shinhan Bank being amongst the most active ones. Currently, the bank is working on the development of its metaverse platform, which will feature a virtual banking branch and provide financial education, among other things. The platform is scheduled to be completed by H1 2022.

Meanwhile, Hana Bank has launched a digital innovation taskforce that’s responsible for developing metaverse initiatives. And KB Kookmin Bank, which has held some of its business meetings on metaverse platform Gather, is now looking to leverage its experience to open up a virtual metaverse branch soon.

What’s the Metaverse economy and what’s fueling it?

The metaverse concept, which refers to shared virtual worlds where land, buildings, avatars and objects can be bought and sold. In these virtual environments, people can wander around, interact with other people, visit buildings, buy goods and services, and attend events.

The Metaverse Ecosystem Diagram by Newzoo, a gaming and e-sports analytics and research firm, shows a vast and rich metaverse ecosystem that comprises metaverse gateways, platforms and infrastructures, as well as a variety of services providers that come to enhance customers experience with identity, social, gaming and economic services.


Metaverse Ecosystem Diagram, Source: Newzoo

The ongoing boom in the metaverse concept has been largely driven by the pandemic which has pushed more people online and towards virtual realities. Development in blockchain technology and the non-fungible token (NFT) frenzy have also accelerated the trend.

NFTs are a type of blockchain-based tokens that are not interchangeable with one another. They can represent pretty much anything, but so far, application has been largely focused on digital files such as art, audio, videos, items in video games and other forms of creative work.

Over the past year, NFTs have been all the rage. Market value tripled in 2020 to reach more than US$250 million, according to a report by Nonfungible.com, a platform that tracks NFT transactions and marketplaces. In Q1 2021, NFT sales soared to over US$2 billion, more than 20 times the volume of the previous quarter.

Several high profile NFT sales took place this year: a digital artwork by American artist Mike Winkelmann, known as Beeple, was sold for nearly US$70 million at Christie’s; Jack Dorsey, founder of Twitter and Square, sold an NFT representing his first tweet for over US$2.5 million; and electronic dance musician 3LAU sold a collection of 33 NFTs for a total of US$11.7 million.

And the NFT frenzy is showing no signs of slowing down. Just last month, Italian luxury fashion label Dolce & Gabbana (D&G) launched its first NFT collection of dresses, suits, jackets, tiaras and crowns that can be worn by digital avatars.

Meanwhile, social media giant Facebook, which is gearing up for the launch of Novi, is looking into incorporating NFT capabilities into the digital currency wallet. CEO Mark Zuckerberg has also shared his ambitions to turn Facebook into a “metaverse company.”