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The Metaverse – redefining our reality?

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– Joel Skipper, D2 Legal Technology

It’s all well and good hearing that the metaverse is the next big thing, but just what is it? Rather than viewing the metaverse as some abstract land, it’s best to see it as the next evolution of the internet and how we will use it. In short, the metaverse is the internet in 3D.[1] Essentially, the purpose of the metaverse is to blur the lines between the digital and physical world through the adoption of augmented and virtual reality.

The platform is made up of four building blocks. First, the space which is to be a shared virtual world with multiple layers that people can access via the internet. Second, the interface itself, which utilises augmented and virtual reality through headsets (and once technology catches up, potentially mobile devices as well). Through this technology, the user is transported from the physical world into the digital. Third, the monetary infrastructure which looks to in-game tokens and cryptocurrencies allowing for digital payment methods. This is a vastly growing ecosphere and one that will play a fundamental roll in the metaverse.  Fourth, the ‘compute’ which refers to the enablement and supply of computing power.  That is to say, the compute is the software which brings objects into 3D.

The applications are near limitless.  If you’ve ever read Ernest Cline’s Ready Player One, or watched the Steven Spielberg adaptation thereof, you know what we mean. It paints a brilliant illustration.

Use cases of the metaverse include, but are not limited to:

–           Virtual advertising

–           Education

–           Healthcare

–           Social commerce

–           Digital events and concerts

–           Tourism

–           Public services

Microsoft has already begun its venture into the space through its ‘HoloLens’, which is the headset Microsoft designed to be used in the healthcare industry as a means of reducing costs and enabling face to face patient interaction – a feature which was particularly helpful during the pandemic.[2] Headsets also allow people to play sports, such as tennis against each other from anywhere in the world.[3]

The Investment Opportunity

The crypto space is one that is rapidly being adopted, to the extent that it is now comparable to the growth seen in the early days of the internet, from the 1990s, to early 2000s. Imagine, if you will, looking at Google’s stock in 2004, back when their IPO offered shares at $85, and fast forward five years and that same stock is worth $230. Ten years later it’s $573 per share. Now it trades at over $2000. Google’s expansion came alongside the growth of the internet: as more and more people adopted the technology, more and more users moved to Google. It is an incredibly fast-growing space, from 413 million users in the year 2000, to over 4.9 billion today.

Compare that to the metaverse. The metaverse represents an evolutionary, rather than revolutionary, step of the internet. The metaverse ecosystem encompasses various areas that are seeing massive growth with users increasing at a rate of over 100% a year.[4]  The metaverse has also been predicted to build an economy worth $8 to $13 trillion by 2030.[5] Of course, all of this depends on mass adoption which requires the requisite technology to be implemented.

The growing exposure of the metaverse makes its further expansion a near guarantee. But don’t just take our word for it, Epic Games has raised over $1bn in private capital funding to accelerate its building work in the area, and of course Microsoft has also spent near $70bn in its acquisition of Activision Blizzard.[6] Finally, Facebook, in October 2018, changed its name to Meta, making a statement of their intention to expand into the space. These tech giants are at the tip of the spear in developing the tools to build the metaverse.[7]

The Platform

So just how will this platform operate?  To understand this, one needs to understand ‘Web2’, a well-trusted and frequently used platform which would create a ‘closed’ metaverse.  Web2 is what the likes of Facebook, Google, Amazon and the like operate on. It allows for the operation of cookies and password sharing – the little things that make the internet experience that bit smoother.  But a key feature of Web2 is that these companies act as a central point for data to flow.

Evolving from this, Web3 represents the next iteration of the internet which moves away from these central data points.  The platform is built on the principle of decentralisation; it’s community owned and governed, interoperable and ensures privacy by design. This is important, and especially from a privacy standpoint. VR and AR technology has an ability to collate a great amount of data to an intrusive extent. For example, the VR technology may observe things like hunger cues and use that information to trigger food advertisements. In a Web2 metaverse, based primarily on privacy by policy, monetisation of data is far more likely to follow the same patterns of Web2 we see today, but on a platform that can allow for far more invasive methods.

Web3, on the other hand, would be decentralised. This means that there isn’t the same ability to monetise data. Web3 is blockchain-based, peer-to-peer and has sign-in wallet utilisation with decentralised storage. In simple terms, your data goes from A to B within a decentralised system.  In a centralised system, like in Web2, data moves from A to C who can store and monetise said data and then send it back out to B.

Challenges

Regulation: Governments need to develop the regulatory structure to tackle the challenges that the metaverse will pose.

Points of focus will be regulating:

  • Harmful and illegal content
  • User privacy
  • Ownership
  • Competition and Antitrust

 Accessibility, Scale and Technological Shortcomings

There are a few issues that stand out.  Web3 is still in its infancy and thus lacks the required size and capabilities to build the metaverse. Currently 6.64bn people have access to a smartphone.[8] With such widespread adoption of the devices, it is likely mobile phones will be a gateway into the metaverse, although improvements need to be made before this can happen.  For example, widespread access to 5G is required to have the requisite speed needed to operate on the system. But with such vast numbers of people operating on a smartphone and adoption being a key consideration to stimulate cashflow, the portable device will more than likely have a role to play in the metaverse.

Additionally, latency is very low.  ‘Latency’ is the time it takes data to travel from point A to point B and back.  For the metaverse to provide a realistic experience, speeds need to increase from their current 170 milliseconds (ms) to 133ms for the average user, and 83ms for more demanding programs.[9]

Further, investments need to be made into hardware, networking, processing power and data to reach the capacity levels required to operate in the metaverse. Experts in the field, such as Raja Koduri mentioned that there needs to be a 1000x increase in computation efficiency from today’s state.[10]

The Takeaway

The metaverse has a variety of uses that are becoming more realistic and within reach as time goes on. However, there are still shortcomings and decisions that need to be made to allow the metaverse to come into fruition.  Many of these decisions will impact the development of the platform and our experience of it – or, dare I say, shape up what is reality.

 

[1] Deloitte, What is the Metaverse, 2022 https://www2.deloitte.com/uk/en/pages/consulting/articles/what-is-the-metaverse.html?gclid=CjwKCAjw7cGUBhA9EiwArBAvos5G6OR8dpiNR9imV3hKTbL7A4_RzB8CKHFixCxHtHDegnLZZ_6I_xoC42IQAvD_BwE
[2] Microsoft, Enhance Patient Treatment, 2022, https://www.microsoft.com/en-us/hololens/industry-healthcare
[3] The University of Edinburgh Business School, The Power of Virtual Reality, https://www.business-school.ed.ac.uk/alumni/aluminate/features/the-power-of-vr
[4] Mail & Guardian, Crypto in 2022: From crypto adoption outpacing the internet, to which sectors are worth watching out for, and everything in between, 25 Jan 2022, https://mg.co.za/special-reports/2022-01-25-crypto-in-2022-from-crypto-adoption-outpacing-the-internet-to-which-sectors-are-worth-watching-out-for-and-everything-in-between/#:~:text=Cryptocurrency%20users%20are%20growing%20at,1%2Dbillion%20users%20by%202024
[5] Citi GPS, Metaverse and Money: Decrypting the Future, March 2022, pg. 4
[6] Microsoft New Center, Microsoft to acquire Activision Blizzard to bring the joy and community of gaming to everyone, across every device, Jan 18 2022, https://news.microsoft.com/2022/01/18/microsoft-to-acquire-activision-blizzard-to-bring-the-joy-and-community-of-gaming-to-everyone-across-every-device/
[7] Other noteworthy companies include: Pixelynx, Crucible, Mythical, Hadean, Nvidia and Manticore
[8] Ash Turner, How many Smartphones are in the World?https://www.bankmycell.com/blog/how-many-phones-are-in-the-world#:~:text=How%20Many%20People%20Have%20Smartphones%20In%20The%20World%3F&text=According%20to%20Statista%2C%20the%20current,world’s%20population%20owns%20a%20smartphone.
[9] Supra 5, Sri Iyer, CEO and Founder of game performance, pg. 65
[10] Supra 5, pg. 69

Banking

Poor software testing puts banks at high risk of IT failures

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 Sune Engsig, VP Product at Leapwork

 

IT failures have plagued the banking industry for several years. From the TSB computer systems meltdown in 2018 costing the bank £330m and causing 80,000 customers to switch to a competitor, to Lloyds, Halifax and Bank of Scotland suffering an IT glitch on payday this year with customers’ faster payments and transfers being delayed.

Despite MPs calling for regulators to act, condemning the number of IT failures in the financial services sector as ‘unacceptable,’ the industry continues to let them happen leaving more and more irate customers locked out of their accounts. But with bank branches disappearing fast, customers are now far more reliant on online and mobile banking, so ensuring technology systems function correctly is paramount.  When you consider the complex compliance and regulatory setup of banks and other financial institutions, and the fact that they are dealing with incredibly sensitive customer information, those that do experience outages can face irreversible consequences such as loss of customer loyalty, severe reputational damage and regulatory fines.

A critical step in mitigating IT failures is having effective testing capabilities in place to find and fix any errors before new software is rolled out to market or new IT migrations take place. This lowers the risk of software failures and outages occurring after launch. Yet, 70% of software testers in banking and financial services think it’s acceptable to release software that hasn’t been properly tested, so long as it’s patched later, according to research by Leapwork. Furthermore, only 40% think software failures are a big risk to their company. But when the impact of an IT failure is so severe, why do banks still take risks?

 

Software testing challenges

Despite the swathes of software businesses now rely upon, 85% of software testing is still done manually. When it comes to the banking sector, as these institutions continue to develop new digitised products and services with increasingly sophisticated and customised software, it is clear that manual testing can no longer be the default. It is time-consuming, cannot scale amidst a skills crisis, and leaves companies open to human error.

There is a huge amount of pressure on IT teams to develop and release new software or manage new IT migrations. A critical step on this journey is having effective testing capabilities in place, like test automation, to find and fix any errors and bugs before new software is rolled out to market. This lowers the risk of outages and failures occurring after launch, which can negatively impact a company’s reputation and bottom line.

However, while some organisations recognise the value of automation tools, many continue to rely too heavily on code-dependant tools which, while an improvement on manual testing, are incredibly complicated to use and thus require specific skills and experience to operate. This means they too are impossible to scale, as they often depend upon developer skills.

 

Skills shortage forcing banks to take risks

Ensuring you undertake proper software testing seems like a no-brainer, but 40% of software goes to market without sufficient testing. The reason why; one in five (21%) of banking and financial services testers say ‘lack of available skilled developers.’ As companies transition from manual to automated testing, which typically requires coding skills, the major global developer skills shortage is creating bottlenecks, increasing costs and delaying project delivery times as development teams try to upskill manual testers, hire new talent or lean on existing developers.

As a result of the skills shortage, only 30% of testers in banking and financial services say they’re using some element of automation (i.e., an automation tool or a combination of manual and automation). In fact, 40% of CEOs across all industries think the fact that their company still relies on manual testing is the main reason why software isn’t tested properly, with 58% of testers in banking and financial services saying ‘underinvestment in test automation’ is the reason sufficient testing does not occur.

 

Testing issues not on CEOs’ agenda until too late

Across all sectors, 69% of CEOs think it’s acceptable to release software that hasn’t been properly tested, so long as it’s patched later, but 68% of testers claim their teams spend five to 10 days per year patching software. While nearly all testers express concern that insufficiently tested software is going to market, the overwhelming majority (75%) of CEOs say they’re confident their software is tested regularly. These numbers show a huge disconnect between CEOs and testers indicating that testing issues are falling under the radar and not being escalated until it’s too late.

 

Moving toward an automated future

Banking and financial services have been thought of as slow-moving and lacking innovation in the past. That isn’t the case anymore, as we’ve seen the industry take great strides towards digitalisation in recent years. However, with that digital transformation and integration of software comes outages, the consequences of which mean millions of pounds lost.

UK banks are at high risk of IT failures due to insufficient software testing, and a reliance on manual testing. On the current trajectory, more and more banks will struggle with failures and outages which could cost them a significant amount in financial and reputational damage. To minimise risk, they need to transition from manual to automated testing and explore testing options that don’t require coding skills so it’s easier to hire in talent or upskill existing team members, whether that be testers or everyday business users. Only then can they increase productivity and time to market while decreasing risk and costs.

 

 

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Business

Financial Services Makes Gains In Employee Engagement

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By Phil Chambers, GM Workday Peakon Employee Voice 

 

A new report shows that the financial services industry improved in almost all elements of employee engagement last year. Can such momentum be sustained?

After more than two years of change, one thing is certain: keeping workers engaged has become more challenging – and more urgent. Record numbers of workers have left their jobs in the UK. And, as turnover has increased, employee engagement – people’s mental and emotional investment in their work and workplace – has been tested. In today’s climate, engagement isn’t a nice-to-have; it’s a business imperative – especially as companies with engaged employees are known to reap benefits including higher productivity, customer satisfaction, and profitability.

The financial services industry hasn’t been immune from the so-called Great Reshuffle. But, according to Workday’s latest State of Engagement Report, it did make measurable gains in employee engagement during 2021. Of the 17 industries analysed, financial services’ engagement ranking jumped from ninth to fifth place.

The report analysed nearly 9 million employee responses from almost 2.5 million employees throughout 2021. It compared the engagement scores given by employees working in different industries over the 12-month period, as well as scores for the 14 drivers of engagement – including autonomy, goal setting, meaningful work, reward, and recognition.

Organisations in the financial services industry have been considered less   quick to evolve than others. PwC recently characterised insurance companies, for instance, as “traditionally risk-averse and slow to change”. But, as the report shows, financial services clearly made some improvements. It is noteworthy given the enduring pandemic-related economic turbulence of 2021 – and the fact that during that time global engagement scores overall slightly declined.

 

Where The Financial Services Industry Improved in Employee Engagement

Remarkably, the financial services industry saw increased rankings and scores in all but one of the 14 engagement drivers that the State of Engagement report measures.

Of all 17 industries analysed, financial services took top place for goal setting by the end of 2021 (up from sixth at the start of the year) and landed among the top three sectors for strategy and recognition too. These strong results indicate the industry provided clear direction to its people at both individual and organisational levels, and appropriately recognised employees when they met their goals.

The improvement in the industry’s overall engagement, however, was driven largely by a sizable increase in its environment driver score in 2021, suggesting that a significant number of employees responded positively to having more freedom around where they worked during the pandemic. Before the pandemic, it was unusual for financial services firms to offer flexible options at all. But, in 2021, more than ever before, many firms’ employees were working remotely or enjoying a hybrid of both remote and in-office work – as and when offices started to re-open. This unprecedented choice in where, how, and when they worked was appreciated, as the report indicates, by many workers in the sector.

 

Where There’s Room For Improvement

As the report found, many employees feel the amount of work they have is increasingly unmanageable. Workload continues to be a pain point across all industries globally, with workload satisfaction scores dipping slightly in 2021. At the end of the year, financial services received its lowest engagement-driver score for workload and ranked 11th among the 17 industries analysed.

This indicates employees in the financial services industry found their workload less manageable as the year progressed, which is perhaps unsurprising when considering the pandemic’s ongoing toll in many parts of the world, and the fact that remote working can lead to ‘always-on’ work lives.

To help mitigate burnout risk and diminished engagement going forward, financial services leaders and managers will need to stay close to their employees in the months ahead to find out how they can best support them, whether that’s with additional resources, greater work flexibility, or updated benefits. By regularly staying abreast of people’s needs and taking the necessary action, organisations can spot potential problems before they lead to resignations.

 

What The Industry Should Avoid Going Forward

In recent months, we’ve seen some financial institutions try to take a “return to normal” approach, requesting their people go back to working onsite five days a week. But, as the report shows, this approach may not be the best one for everyone, particularly as the past two years have revealed that many employees appreciate and benefit from a greater degree of flexibility.

Of course, not all organisations will be able to provide hybrid or remote arrangements for all their people. But greater flexibility doesn’t necessarily have to mean working remotely. It could mean more flexible scheduling options, or a shift in working hours to enable a greater work-life balance.

Either way, to retain the engagement gains achieved in 2021, the financial services industry should resist the temptation to look back, and must instead take learnings from the past two years. Amid so much economic and societal change, and with employees continuing to shift jobs in record numbers, companies cannot simply go back to before, but need to continue moving forward, listening to the needs of their people, and leading with empathy.

Specifically, leaders and managers in financial services will need to stay closer than ever to employee feedback, going beyond listening and working fast to implement change accordingly.

For the industry to continue making positive gains in employee engagement, it will need to: consider how to retain a degree of flexibility – updating models to reflect evolving employee needs; continue to provide clear individual and organisational direction to those working remotely and on site; create and maintain more manageable workloads through prioritisation and automating repetitive tasks; and continue to reward and recognise employees for their hard work and achievements.

While great strides were made last year, it’s more important now than ever that leaders in the financial services industry determine and understand how employees are feeling so that organisations can explore and shape a future of work that works for everyone.

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