By Kaj Burchardi, Managing Director at BCG

The Metaverse is a term we’ve seen creeping into more and more of our daily conversations; the next generation of the internet, a virtual reality seamlessly woven into the physical world where Web3 elements are combined with VR experiences. When picturing the Metaverse, a futuristic image comes to mind, an online world in which we may all be virtually eating, shopping, and attending events in the not-so-distant future.

But this can be daunting to those of us who haven’t had much involvement in virtual spaces. And that’s a lot of people. The Metaverse will be an increasingly interesting platform for both consumers and brands and there is a growing sense of curiosity about what it claims to offer. It will provide valuable opportunities to those who choose to invest.

Well-known brands such as Nike and Adidas have already entered this space in order to make their mark in virtual reality and we’ve seen large investments made. NFTs are a substantial part of this. Viewed as collectibles, assets, or investments, we will see the buying and trading of them become increasingly common as the Metaverse economy develops. Shifting to the use of NFTs in the Metaverse will position brands as future-orientated and innovative, allowing them to have a seamless journey into the Metaverse and to collaborate with like-minded brands.

Preparing for mass adoption  

Current users of the Metaverse have experienced everything from a virtual Travis Scott concert to virtual restaurants and farmers markets. They have also participated in a sizeable virtual-asset economy, buying, selling, and creating goods such as clothing, real estate, art, and currency. In a relatively short amount of time, these NFTs have presented immeasurable opportunities and the market was valued at $22 billion in 2021.

Their role in the Metaverse will only accelerate the market’s growth and it’s exciting to consider where it will take us and who will be investing in them. Those looking to enter the metaverse will have more confidence to do so, which will increase virtual reality adoption.

The Metaverse will act as a platform where users can showcase and trade their collection of NFTs in the form of art, music, and property between users directly – but an intricate technology stack is needed to accommodate these NFTs.

After the creation of Web1 and Web2, Web3 has been created as a platform for the modern user and aligns with the Metaverse. It will and already has shifted behaviours around content online allowing users to consume, create and directly own content independent from a platform.

The decentralisation along with blockchain technology provides trust which will enable both consumption and exchange, and this powerful technology stack will always underpin virtual assets.  There are already some 30 million NFT wallets – including 1 million active wallets – highlighting the growing market and as the popularity of the Metaverse grows, virtual assets could increase in economic value and become an asset so valuable we can’t ignore.

Ever heard of a virtual burger? 

There are multiple applications of NFTs today already. Most notably – McDonalds commemorated the return of their McRib with their first ever NFT drop. Iconic fashion house Louis Vuitton launched Louis the Game which integrated 30 NFTs and Gucci auctioned a new NFT inspired by their autumn-winter collection. Though the value of these NFTs is undetermined, they also come in the form of entry tickets, music rights or ownership and art that all have value.

Web3, although still in its infancy, is powering this vibrant virtual asset economy and means space is being created that will attract a strong user community.

The Sandbox and Decentraland 

Both The Sandbox and Decentraland leverage Web3 technology and are designed to integrate with the tech stack. This is also attracting major brands. 

They, along with Web3, facilitate interoperability between Metaverse worlds such as the ability to use the same NFT-proven asset on multiple platforms, as well as interoperability between m-worlds and the web, such as the ability to buy NFTs on “traditional” websites. The combination of asset creation capabilities and monetisation opportunities is addictive for both creators and users, since they are all stakeholders.

With extensive and powerful technologies such as the above as well as blockchain, NFTs have a brilliant foundation to leverage their value and purpose within the Metaverse.

Tremors following Russia’s invasion of Ukraine have been felt around the world. At a time when customers are already demanding more from companies, the additional pressure being felt — especially by banks and financial services — to prioritize compliance and risk management is stronger than ever before. This has been further compounded by the realization across Western democracies of the extent of the Kremlin’s financial links within their jurisdictions, adding yet more pressure on governments to implement regulatory change. The need to investigate unexplained wealth orders and provide stronger reporting measures to tackle illicit transactions is more necessary now than ever before, while simultaneously ensuring sanctions do not impact the security of ordinary citizens’ bank accounts.

Anti-Money Laundering (AML) was once merely a tick box exercise. However, those in compliance now see financial crime and any link to bad actors as a legitimate risk to the reputation and the future success of financial organizations. As the industry moves in this direction, the entire ecosystem — law enforcement, regulators, and financial institutions — must move with it. Investment in banking technology is increasingly being focused on the development of more sophisticated solutions in the AML and anti-financial crime space. Clearly, there is more to be done in establishing the openness, reliability and safety needed to ensure customers’ assets remain secure. While some of the more traditional organizations still use fairly basic tools, there is a desire to innovate quickly and effectively, with a focus on implementing high-risk–reducing activities that can provide AML alerts in real-time across both traditional finance and the growing presence of digital assets.

However, the banking sector is also on the precipice of great change and dynamism, and AML has a fundamental role in achieving this success, especially for the emerging economies market. A report by PwC highlighted that Brazil, Indonesia, Mexico, and Turkey will develop banking sectors of comparable scale to major European economies such as the UK, France, and Italy before 2040. Meanwhile, EY’s report in 2019 showed that financial inclusion can help boost GDP by up to 14% in large developing economies such as India, and up to 30% in frontier markets across Africa. These predictions are being aided by the continued rise of digital assets, growing exponentially, and projected to reach $4.94 billion by 2030, growing at a CAGR of 12.8% from 2021 to 2030, providing capital access to customers worldwide through instant decentralized transactions.

This makes the need for frictionless financial activity imperative, ensuring businesses have constant access to capital to invest alongside the security of working with banking providers with industry-leading AML services in place.

At Zenus Bank, we have approached this challenge by offering a US bank account that allows clients in over 150 countries to deposit, hold and make payments through US banking infrastructure. This form of international movement makes secure worldwide AML services an imperative.

As demand for our services has grown rapidly this year across Asia, Europe, and South America, we knew to scale at speed we needed to have a secure AML system that would allow us to grow our operations remotely without compromise. Adopting systems such as Identity Onboarding Authentication (IOA) has been key to achieving this. The technology streamlines the onboarding process for all our new customers using facial and voice recognition combined with artificial intelligence, all but eliminating the risk of individuals or businesses setting up fake accounts. IOA also validates thousands of identification documents in seconds, comparing the customer’s ID when submitting transactions to their facial recognition to provide financial security for us and our customers against money laundering. This type of full cycle integration of customer biometric validation and frictionless connectivity with multiple vendors is essential for financial irregularities and fraud prevention, eliminating old protection systems such as the need for passwords, personal questions, or other weak links in the security chain.

And so, the future of AML is two-fold: helping to fight the rising risks of financial crime that come with the increase of embedded financial services, and to ensure the ever more complex forms of payment can be completed at speed while monitoring the legality of each transaction in real-time.  AML is no longer just a tick box exercise — it is key to the future success of the financial industry.