Published Date:Feb-18-2022 | Author:Shreyansh Gupta | Designation:Senior Research Associate
JP Morgan Enters Metaverse: Eyes Trillion Dollar Opportunity
JP Morgan has become the first bank to enter the metaverse, with the launch of a lounge in Decentraland, a popular blockchain-based metaverse. This is the banking giant’s first foray into the metaverse, where it hopes to reap financial rewards. JP Morgan becomes first major bank to enter the metaverse, as it predicts a metaverse market opportunity of US$1 trillion and eyes virtual real estate.
The metaverse is a virtual environment where digital avatars of individuals can socialise, attend events, and explore. The bank's Onyx lounge, which is named after the bank's suite of permissioned Ethereum-based services, allows institutions and organisations to access the metaverse. A tiger roams the first floor of the Onyx Lounge in Metaiuku, a virtual recreation of Tokyo's Harajuku shopping district, with an image of the bank's CEO Jamie Dimon. On the second floor a person’s avatar can watch experts talk about the crypto market.
Banks approach to the metaverse:
Having a robust and flexible financial infrastructure that allows users to effortlessly interact between the physical and virtual worlds is critical to the success of creating and scaling in the metaverse. Interoperability will grow as a result of their approach to payments and financial infrastructure.
The Company that the current virtual gaming landscape (each virtual world with its own population, GDP, in-game money, and digital assets) contains features that are analogous to the current global economy. In addition to their at-scale consumer footprint, the company's long-standing core expertise in cross-border payments, foreign exchange, financial asset creation, trading, and safekeeping can play a vital role in the metaverse.
They are building and scaling new emerging technologies to modernize infrastructure and business models including but not limited to tokenization and digital identity, as they strive for perpetual innovation and better ways to organize financial transactions and payments in the decentralized web.
Expanded opportunities across industries and countries:
The benefits will not be limited to business-to-consumer situations. Business-to-business firms will have a huge opportunity in the metaverse. Consider a company that is in the market for new equipment parts. At the moment, the procedure entails obtaining a printed brochure or an emailed PDF containing static 2D images. Users could evaluate products in a virtual environment for a lesser cost in the metaverse. Imagine being able to create a large-scale digital twin of a factory or industrial location to test how robotics systems interact with the physical world.
One of the metaverse's most exciting prospects is that it will vastly increase market access for customers from emerging and frontier economies. The internet has already opened up access to previously unavailable goods and services. Workers from low-income countries, for example, may now be able to find work in western corporations without emigrating. Virtual reality environments will help enhance educational options, as they are a low-cost and effective way to learn.
There will need to be clear governance as a result of these developments. There are chances to significantly scale from a corporate perspective. Rather than opening stores in every city, a large retailer may create a worldwide centre in the metaverse that can serve millions of customers. Beyond retailers, the metaverse will accelerate the migration from cash to crypto in gaming, sports betting, and gambling. Companies like Sightline Payments, which have established infrastructure to facilitate cashless digital gambling for live sports and casinos, are well positioned to profit as these industries swiftly convert to giving metaverse experiences to players.
JPMorgan does not appear to believe that its metaverse lounge will service random metaverse visitors who will create a checking account on the spur of the moment. While the lounge's aim is suspicious, the bank's assessment of the metaverse's prospective opportunities is bang on:
"People are being drawn into the meta-economy by supply and demand dynamics. The market for metaverse real estate may evolve in a similar way to the analogue real estate market over time. Credit, mortgages, and rental agreements could all be available in the virtual real estate market in the future, just as they are in the physical world."
Enabling the Gaming Ecosystem:
"Having a robust and flexible financial infrastructure that allows consumers to effortlessly interact between the physical and virtual worlds is critical to the success of establishing and scaling in the metaverse."
The bank plans to focus on three verticals in order to enable the gaming ecosystem:
- Providing game platform providers with bank-grade goods and access to digital asset platforms is helping to industrialise the industry.
- Offering a simple way for game and multimedia developers to monetize their work.
- Scaling the metaverse industry globally using a variety of currencies and payment methods.
The metaverse offers opportunities to:
Transact: - Every year, US$ 54bn is spent on virtual goods, almost double the amount spent buying music
Socialise: - Approximately US$60bn messages are sent daily on Roblox
Create: - GDP for Second Life was around US$ 650m in 2021 with nearly US$ 80m US dollars paid to creators.
Own: - NFTs currently have a market cap of US$ 41bn.
Experience: - 200 strategic partnerships to date with The Sandbox, including Warner Music Group to launch a music-themed virtual.
Shreyansh Gupta
Senior Research Associate
Stellar Market Research
Consumer Goods and Services Industry
Pune