Metaverse Land (Image: Forbes)
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Israeli FinTech Association – FinTech-Aviv: The Financial Aspects of the Metaverse

Popularised by gaming, the metaverse has grown in popularity. So much so, that other industries are starting to seriously consider investing in it.

The financial aspects of the metaverse are starting to turn heads in the financial industry. With the NFT market size expected to grow by $147.24billion from 2021 to 2026, and the metaverse’s global market currently estimated to be worth $100billion, it can no longer be ignored.

Nir Netzer is a fintech innovation strategist, founding partner of Equitech Group and chairman of The Israeli FinTech Association. With a strict focus on serving the needs of the Israeli fintech ecosystem and with over 30,000 members, The Israeli FinTech Association’s community is rapidly growing through a collective passion for meeting, networking, and sharing knowledge in order to build its products.

One product of these products in question is the metaverse. Speaking to The Fintech Times about its financial aspects, Netzer breaks down the market and looks to the metaverse’s future:

Nir Netzer is the Founding Partner of Equitech Group & Chairman of the Israeli FinTech Association - Fintech-Aviv
Nir Netzer, chairman of the Israeli FinTech Association – FinTech-Aviv

A new frontier is on the horizon, a virtual space filled with uncharted territories, the metaverse has been growing at an unparalleled pace in recent years. We delved into what exactly the metaverse entails and how it continues to affect the future of the digital market landscape. We’ve mapped the hottest trends and are here to share the most interesting figures in order to investigate ways to adapt and accommodate financial elements in this new space.

What is the metaverse?

Within the last couple of years, you’ve probably heard the term metaverse thrown around with a very loose definition, because to each individual it represents something different.

In broad terms, it represents an ever-expanding virtual space used to socialise, work, and to create, share, and sell digital content. Brands have been in the process of developing their own metaverses localised to their products, but are now trying to enable the seamless movement of products from one metaverse to the next, creating one evolving interconnected singular world, the metaverse.

With an already huge global market size of $100billion, its seemingly limitless scalability and interoperability across all types of hardware has made it a major driving force behind many companies looking toward the future of marketing and economics.

The currency of the metaverse

A huge contributor to the future of the metaverse that has garnered a lot of attention over the pandemic is the rise of NFTs (non-fungible token). Allowing everyday people to own an online piece of media that cannot be reproduced or stolen, users can hold their tokens in a metaverse wallet, like digital ones, that can store cryptocurrencies as well.

These wallets are the next step in personal online finance and are continuing to evolve and optimise for the growing market. Users need to have secure online storage while still being able to show off their collections. These collectors have already sent over $37billion to NFT marketplaces in 2022 as of May. The NFT market size is expected to grow by $147.24billion from 2021 to 2026 according to Technavio Report, showing that this is not just a passing fad.

Biggest players we all should know

Currently, there are five billion internet users across the globe (92.4 per cent being on mobile), and Gartner estimated that by 2026, one-fourth of these users will be spending at least an hour each day in the metaverse on anything from work, education, social interaction, or entertainment. The largest make-up of this population are young teenagers. Virtual worlds like Roblox (210 million monthly active users), Fortnite (80 million), and Minecraft (160 million) have an average user age of 12-13 years old and makeup roughly a quarter of the metaverse.

It’s then no surprise then that the biggest contributors to the metaverse’s growth are gaming companies, which is currently a $180billion global industry that derives 75 per cent of its revenue from virtual items – nearly a four-fold increase in market share for this business model over the last decade.

Fortune Business Insights shows that they make up more than 40 per cent of the global metaverse market share, with the second largest sector being social media, taking up nearly a quarter. Near the bottom, we see online shopping only making up 10 per cent.

Reality is what you make it

Starting as a contender in the gaming industry, VR and AR technologies have branched out and established themselves as the major gateway into the metaverse. The latest Gartner report predicted that global spending on VR/AR could rise from $12billion in 2020 to $72.8billion in 2024.

While many companies are moving towards creating more affordable VR devices, AR devices remain cheaper, more accessible, and overall safer than VR making it the more popular choice with a predicted 1.7 billion mobile AR users by 2024. In fact, the combined, gaming and AR/VR experiences in metaverse are looking to be a $390billion industry by 2025, getting nearly all of its revenue from virtual items.

Making the plunge

After seeing the success that the gaming industry has achieved through digital exclusive products alone, many other industries are looking to claim their share of the metaverse.

The biggest proponent of this new age is none other than Meta (previously Facebook) which has recently deposited $50million into non-profit funding groups to help the metaverse grow responsibly, in addition to the $10billion its Meta Reality Labs has already invested. It is also looking to create 10,000 new jobs in Europe alone over the next five years.

McKinsey & Co research details the increasing number of fashion and entertainment companies directing marketing spend and skills to capitalise on the metaverse market could lead to customer demand surpassing $55billion by 2030. One such example is Balenciaga intending to merge the fashion and digital worlds after their successful collaboration with Fortnite, while Hyundai has created Mobility Adventure, a Roblox metaverse showcasing Hyundai Motor goods and future mobility solutions.

Many companies are jumping to corner the market on these new technologies as soon as possible. Nike has already filed four patent and trademark applications for downloadable virtual goods operational in the metaverse.

Even the media titan Disney is looking at developing an entirely online theme park, going as far as filing a patent for a virtual-world simulator. Ally Bank has even gone as far as creating a game called Fintropolis, which aims to help players understand various financial concepts like budgeting, taxation, investing, stock trading and even buying properties.

The newest land grab

The virtual real estate market is currently booming as well. These digital lands let players and brands have a space to create digital experiences that they can populate with user-generated content, in fact online real estate groups Sandbox and Decentraland have seen a huge rise of 700 per cent in prices from January 2021 to December 2021.

No wonder than that The Alexander brothers, a huge name in the real estate market with clients such as Kanye West and Tommy Hilfiger, became the first luxury brokers in the metaverse, investing $4.3million for 2,500 digital parcels of land on Sandbox. These numbers show the roaring success of the digital real estate market, and make it apparent that there is no limit to what is within reach of the metaverse.

Just the beginning

The metaverse is growing faster and faster by the day and many companies are having difficulties keeping up or in some cases struggling to even understand it, but it’s becoming more apparent that this is the newest frontier of our digital era needing to be explored.

It’s ripe for financial institutions to come in and help shape the way people interact and commerce in metaverse. Fortune Business Insights estimated that the metaverse market size could reach $426.9billion by 2027 with a compound annual growth rate (CAGR) of 47.2 per cent. Being well versed and well accumulated to operate in the Metaverse is important for a company’s longevity as shown by almost every industry leader scrambling to stake their claim in fear of being left behind.

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