Digital transformation has been on the biggest opportunities, for years now. And for the banks and other financial industries and service providers it has been a headache. With banks constantly competing to meet the ever changing customer expectations around digital services and striving to keep up with the challenger banks which were basically built digitally! The traditional players will always have a lower hand when playing with these digital native players. But in a way that bigger players can carve out a competitive advantage is by looking further ahead, beyond the one-to-two-year timeframe upon which most digital strategies focus. Having a look at the merging trends , it is likely to define the next few years or more to largely un explode the area of opportunity and to stand out is the virtual economy. As the virtual economy emerges, becoming a system on online jobs, virtual assets and exchanges. It is made up of gaming worlds such as World of Warcraft and Minecraft and non-gaming virtual platforms such as Second Life and Decentraland. It is already big business. The economic activity in these virtual worlds is worth well over $100 billion annually and is growing rapidly.
Financial services within the virtual economy are very rich and diverse, the revenue opportunities lie in the virtual assets. Virtual assets come in all shapes and sizes—including weapons, cars, real estate, “skins”, clothing, characters, accessories, currencies and more. The most expensive virtual asset sale was “Club Neverdie”, a popular nightclub in the game Entropia Universe, which was sold in separate lots for a total value of $635,000 in 2010. More recent examples include a virtual F1 car that sold for more than $113,000 and a “battle cruiser” in the game Crypto Space Commander, which sold for $45,250. The in game items created by publishers and players, the bulk of virtual assets are sold through micro transactions. To take Fortnite as an example, the average player spends $20 a month on items such as skins and weapons. However, there is a growing market for virtual assets that are “tokenized” on a blockchain—a system in which a record of transactions is maintained across several computers linked in a peer-to-peer network. This latter category, of which the F1 car and battle cruiser are prime examples, is where the biggest opportunities lie. Collectables such as Crypto Kitties are a straightforward early application of NFTs, but users are starting to gravitate towards more complex assets that have genuine utility. Examples also include virtual real estate such as Crypt voxelsand visual art such as Josie Bellinas well as social-network handles, event tickets and even ownership records for physical assets.
The NFT markets still remain volatile and sensitive to the fluctuations in the crypto currencies and the actions of a small number of powerful users. And with the emergence of new exchanges such as OpenSeait’s now possible to establish a live market value and historical price data for virtual assets. Investors are starting to find commercial uses for the NFTs. Virtual cities complete with virtual real estate and virtual designer goods have sprung up and attracted significant investment. One investor, “Matty”, made $60,000 speculating on virtual land.Investments in NFTs also surged as lockdowns took effect in late March and April (when compared with the previous months), generating more than $2.20 million in transaction volume between March 29 and April 22. Meanwhile, total NFT sales have just surpassed $100 million. Brands such as Nike, Formula 1, Louis Vuitton and Samsung are also examples of big names investing in the trade of NFTs.
The pressure of digital transformation is not going anywhere and the banks need to continue working towards building the mobile and digital offerings that customer want here and now.