By Dr. Ebenezer Onyeagwu
When Neal Stephenson first postulated the idea of humans interacting in a three-dimensional virtual space in his 1992 science fiction novel “Snow Crash”, many deemed it unrealistic and futuristic. Such scepticism arose from the era’s technological limitations, where the tools to build a fully immersive digital world were largely in their infancy. However, with the rapid technological advancements witnessed in recent years – the proliferation of the internet; breakthroughs in blockchain, cloud computing, artificial intelligence (AI) and virtual/augmented reality (VR/AR); and the growth of digital social platforms – the dream of a complete Metaverse is nearing actualisation.
Currently, the Metaverse is in its early phases. Its definition remains somewhat elusive, without universal agreement. However, at its heart, it is a vast virtual space made possible by the union of the aforementioned technologies. It represents a fusion of our physical and digital realities, crafting a distinct and immersive 3D setting for human connection. And while its exact definition may be debated, there is a growing consensus about its potential to profoundly revolutionise human interactions. Indeed, at its full-scale realisation, the Metaverse will alter how humans interact with each other and engage in activities like working, socialising, playing and shopping within the digital space. This transformative impact is expected to unlock a wide range of economic opportunities across various sectors.
A June 2022 report from the McKinsey Global Institute (MGI) suggested that value creation in the Metaverse could reach $5 trillion by 2030. Specifically, MGI estimates an economic impact of up to $2.6 trillion on e-commerce, around $270 billion on the academic virtual learning market, about $206 billion impact on the advertising market and nearly $125 billion impact on the gaming market, amongst other sectors. It is also noteworthy that corporate giants like Meta, Roblox, and Microsoft reportedly invested roughly $177 billion into Metaverse development from 2021 to mid-2022. As businesses and consumers look towards the Metaverse, we see the dawn of a new virtual economy. Much like our traditional economies, this budding digital counterpart will encompass transactions of virtual goods, digital assets, experiences, and services, ranging from virtual real estate, digital art, in-game items, virtual fashion, virtual events, and even virtual jobs. According to research conducted by Gartner in 2022, about 30 per cent of global brands will have metaverse-ready goods and services by 2026.
The rise of the Metaverse economy undeniably signals vast implications, notably for the financial services sector. One major transformation will be in the realm of payment systems, causing a further shift from traditional to digital payment. Put differently, the Metaverse economy could further popularise and normalise virtual currencies such as cryptocurrencies, Central Bank Digital Currencies (CBDCs), Non-Fungible Tokens (NFTs), etc. Payment service providers will focus on developing the digital payment value chain – virtual currencies, cross-border payment platforms, virtual wallets, and requisite technologies such as blockchain and Decentralised Finance (DeFi).
With the Metaverse setting the stage for digital payments as the norm, investment and focus will naturally gravitate towards bolstering cybersecurity and privacy. These virtual transactions require robust security measures to prevent fraud, hacking, unauthorised access to virtual assets, and phishing targeted at users and the infrastructure. As cybersecurity efforts prove effective in ensuring these virtual platforms remain secure, more users are likely to embrace digital payments, thereby popularising and sustaining the adoption of digital payment methods.
In conclusion, the transformative potential of the Metaverse suggests that businesses should be forward-thinking and strategically positioned to benefit from technological change. Especially for financial services firms, there is a pivotal role ahead in catering to the unique payment demands of this emergent virtual economy. With the horizon of the Metaverse economy in sight, the future of payment systems is, without a doubt, digital.
Dr. Ebenezer Onyeagwu is the Group Managing Director/CEO of Zenith Bank Plc and Chairman of the Body of Banks’ CEOs in Nigeria.
This opinion was first published in the Zenith Economic Quarterly Vol. 19 No. 3 July 2023, in his column “CEO Insight”.