Written by 9:19 am Archives

Descartes’​ Promise for the Metaverse: “I bank, therefore I am”

What ‘Media Armageddon’ can teach us about the Metaverse

“Every company should be its own media company.” Richard Edelman’s been saying it since 2015 and repeating it ever since. And he’s in pretty good company; formerly the Financial Times’ man in Silicon Valley has been saying this since 2009:  “I realized that every company is now a media company. It doesn’t matter if it makes network gear or diapers, every company needs to publish to its various communities, its customers, its staff, its’ neighbours.”

These insights remain as pertinent as they were a decade ago; but they didn’t end there. Today, every individual is a media company with precisely the same the power to broadcast (provided they can find an audience). The barriers to entry are effectively the price of a mobile phone.

We can discuss the consequences of every individual being able to share the contents of his/her ruminations (or lunch!) with an unsuspecting public, but the reality is that they can without any recourse to any ‘official’ media. The age of media disintermediation is complete.

Or is it?

The data suggests otherwise. 

While broad advertising revenues are a fraction of the levels reached in the 1990s (pre-Internet/pre-mobile), mainstream media is far from irrelevant. At the turn of the last decade US newspapers actually generated more revenue from subscriptions than advertising for the first time, while TV audiences have grown threefold since 2018, fueled by the pandemic and a particularly fervent political scene. Web-based radio listenership (including Podcasts) has surpassed its terrestrial predecessor, and online advertising has also overtaken traditional ads across US media. 

So, while the arrival of Web (and mobile, in particular) undisputedly proved disruptive to the traditional media sector, it was not fatal. The media sector adapted and continues to do so; it certainly seems a long way from ‘Armageddon’!

I see clear with the emergence of the Metaverse with respect to banking; the combination of immersive technology and de-centralised architecture (Blockchain). If the arrival of Web2 effectively made everyone a media company, the promise of Web 3 is for every individual to become a financial services company.

Blockchain facilitates the emergence of community-based instruments such as Non Fungible Tokens (NFTs) where value can be created and exchanged direct to members or ‘owners’, or Decentralised Autonomous Organisation (DAO) enabling policies to be agreed and implemented at scale; in both cases, with no dependence (or even reference) to a third party authority.

It certainly looks like a form of ‘banking disintermediation’, since that last aspect is precisely what banks do; they validate transactions, ensure compliance, act as guarantors for both parties as well as respective governments (in terms of fiscal and regulatory compliance). In essence, banks ensure that everyone adheres to the rules – that’s what they do. If those same ‘rules’ can be assured directly between the transacting parties themselves, doesn’t the bank become obsolete?

If Web 2 and media disintermediation demonstrated one thing, it’s the ability for industries to adapt, and the banking sector will prove no exception. They have a history of adapting: French banks, for instance, traditionally conveyed their reputation and prestige through physical architecture (as much as their credit ratios!), as Societé General’s Parisian head office proudly demonstrates. This is nothing compared to BNP Parisbas’ Rue Rougemont branch (just next to the famous cabaret Les Follies Bergères); remember, this is not a head office – just a local branch!

But with the arrival of Web 2 times changed and so (eventually) did traditional banks. Today, France’s biggest online bank, Boursorama is actually a department of Societé Generale. My guess is that arrival of Web 3 will prove no different; already banks such as JP Morgan and HSBC are establishing a virtual presence in the Metaverse to deliver traditional services.  

At the other end of the scale – the decentralised nature of Blockchain – traditional banks are also ‘piling in’ to new instruments such as crypto currency. In Brazil, where many of my clients are based, Nubank recently reported how one million of their customers had started trading cryptocurrency just three weeks since the launch of their crypto platform, surpassing their growth target for the entire year!

Separately, these trends represent market innovation; their combination – the essence of the Metaverse – would represent a genuine societal shift.

Returning to the unfulfilled Media Armageddon mentioned above, the parallels are compelling: if every individual today is a media company, the Metaverse will enable every individual to become a bank.

In exactly the same way as media disintermediation enabled individuals to ‘compete’ with media houses, banking disintermediation could enable individuals to lend, borrow, trade assets, exchange financial instruments direct, without any intermediary.

This development would have particular implications for the World’s 1.7 billion unbanked citizens. The Metaverse could mean that – simply by existing – anyone is already connected to the banking system.  Or as Descartes would say: “I bank, therefore I am.”

Now, there is a proposition!

I think that portents of banking Armageddon are just as misplaced as their media counterpart a generation earlier. Banks will adapt; but it may not only be other banks (or even other corporations) that they are competing against.

(Visited 1 times, 1 visits today)