Kar-Wee Ang, Business Development Director at the London Institute of Banking & Finance | 23 May 2022
Asia’s consumers have particularly high-speed internet access. Will that help Asia’s banks to be the first to develop services in the metaverse? Kar-Wee Ang, Business Development Director at the London Institute of Banking & Finance argues that it should
The metaverse is predicted to be a huge money spinner. Citi Global Insights estimates that its total addressable market could be over US$10 trillion with around 5 billion users.
But what is the metaverse? A clear definition, much like the digital space itself, is a work in progress. Where Web 3.0 brought us decentralised services on the blockchain and big data, Web 4.0 promises a decentralised internet that blurs the line between digital and physical. That, some suggest, will be the metaverse. The potential steps toward it include a more complex version of a massively multiplayer online role-playing games (MMORPG) and a 3D world that people ‘inhabit’ with avatars.
If the full ambition of the metaverse is realised – an internet without separate platforms, without centralised control and with no need for any proprietary devices to access it – it could change the way many businesses operate.
For example, telecom equipment vendor Ericsson expects a new ‘Internet of Senses”. It says: “Imagine an immersive experience of a beach where you can feel the wind blowing on your face, the heat of the sun on your back, the humidity of the ocean air on your skin, and experience the fresh smell of the ocean breeze – right into your living room”. In that world, holograms that seem very close to real could take part in ‘in-person’ meetings.
Sound unlikely? Major investment in the metaverse is already underway. Microsoft, for example, recently spent US$75bn on the video game maker Activision-Blizzard. Its CEO, Satya Nadella, said it expects it to “provide building blocks for the metaverse”.
But even if large corporations spend a lot on getting ready for the metaverse, a good experience that encourages lots of consumer engagement is not a given. In particular, the metaverse is likely to fall flat without high-speed network access. And that is why Asia – particularly Singapore – might find it is an important testing ground for the metaverse. Asia has the highest density of fibre to the home in the world.
High-speed internet access in Asia
By 2026, nearly 95% of the fixed broadband in APAC will be fibre-to-the-home or building (FTTH/B), according to GlobalData. Singapore is out in front with nearly 100% FTTH/B penetration expected by 2026. It’s closely followed by Vietnam, Hong Kong and Malaysia, with 96.6%, 93.0%, and 92.8% FTTH/B penetration by 2026 respectively, the research says.
That puts Asia far ahead of Europe and the US. In Europe, for example, Germany aims to have (FTTH/B) for at least 50% of all Germany companies and businesses by the end of 2025 (three times the current penetration). In the US, as things stand, around 43% of households have fibre internet access.
One of the main reasons for the gap is that it’s much easier to give a whole population fibre connectivity when most people live in high-rise buildings rather than in more scattered homes. That multi-dwelling-effect benefits Singapore in particular.
But why does the connectivity speed matter? For online experiences to be immersive, the perceived time lag between a user, say, reaching for a sword in an online game and ‘using’ it has to be very short. Otherwise, the experience feels ‘off’. Swedish telecom equipment company Ericsson says that time-critical video games require 30 millisecond end-to-end network latency to work well. The lowest latency connection, of course, is fibre.
Asian banks are moving into the metaverse
HSBC recently announced that it is setting up a metaverse investment fund aimed at high-net-worth clients in Asia. It already has skin in the game with a “plot of land” in the The Sandbox, a virtual world where it can engage with gamers and e-sports fans.
HSBC says its ‘Metaverse Discretionary Strategy portfolio’ will allow investors to put money into five different aspects of metaverse: infrastructure, computing, virtualisation, experience and discovery, and interface.
It’s not the only bank in Asia that is keen to get in on the ground floor. Mary Huen, chief executive of Standard Chartered, Hong Kong said: “The metaverse is a vision for the next phase in the internet’s evolution, bringing new possibilities and unique experiences through the use of immersive technologies.” Standard Chartered has bought a plot of land in The Sandbox’s Mega City, a culture hub with a Hong Kong theme.
When will the metaverse be an everyday part of banking? HSBC expects the metaverse to develop rapidly. “We see many exciting opportunities in this space as companies of different backgrounds and sizes are flocking into the ecosystem,” Lina Lim, regional head of discretionary and funds for investments and wealth solutions, Asia Pacific, at HSBC, said in a statement.
But what will banks be allowed to do in the metaverse?
To protect businesses and consumers, banks are highly regulated. Though that can slow innovation, regulators don’t want the stability of the graveyard. The best regulatory outcomes make full use of technology in a way that reduces costs, boosts inclusion, and furthers innovation – without undue risk.
So, what might Asian regulators do to encourage a careful exploration of the metaverse? There could be some indications in their view of cryptocurrencies and decentralised finance. The Monetary Authority of Singapore, for example, “strongly encourages the development of blockchain technology and innovative application of crypto tokens in value-adding use cases”.
That said, don’t expect a free-for-all in the metaverse. Do expect banks that service the best-connected consumers in the world, under the guidance of innovative regulators, to be among the first to be able to build out true metaverse services.