Opportunities, Prospects and Business Models Brought by the Development of the Singapore Dollar Universe

Source: The Paper

Organizer: Shao Zhicheng

In recent years, the largest bank in Southeast Asia, DBS Bank of Singapore (DBS), is actively exploring the Metaverse and considering entering this field, and is preparing to invest part of its funds in the Metaverse to consolidate its digital banking business. The bank is highly optimistic about Metaverse and is exploring Metaverse and non-fungible tokens (NFT) as its development direction. Over the past 4 years, DBS has invested an average of more than S$1 billion (approx. US$722 million) in technology infrastructure including Metaverse. Jimmy Ng, Chief Information Officer of DBS Bank in Singapore, told Nikkei Asia Online that the company is looking for ways to bring banking services to the metaverse and continues to invest heavily in its digital transformation. This article compiles and summarizes the research report "Can the Metaverse Break the Limits of the Physical World?" published by DBS Bank in 2022. "(Can Metaverse Break Constraints of Physical World?), the main content, strives to gain insight into the development of Singapore's digital economy, and explore the opportunities and challenges faced by the metaverse economy in Southeast Asia in the future.

1. The metaverse provides human beings with the opportunity to get rid of the shackles of the physical world

There are multiple interpretations of the concept of "metaverse". According to one survey, only 15% of people know how to explain the Metaverse to other people. Even within the tech world, definitions of the term vary: (1) American company Meta Platforms (also known as Facebook) sees the Metaverse as an extension of the social network that allows people to share immersive content with others across space. (2) Third-generation Internet (Web3.0) enthusiasts believe that this is related to labeling. For each metaverse, there is a unique metaverse token. For example, in the virtual game world of Sandbox, players can obtain SAND tokens, which can be used to purchase virtual goods in Sandbox; (3) Non-third-generation Internet enthusiasts think that it is an immersive virtual world about people's life, work and entertainment. world.

However, DBS believes the Metaverse is more than that. They see the Metaverse as an alternate digital reality that offers humans the opportunity to escape the constraints of the physical world and experience things that would otherwise be impractical or impossible. DBS defines the Metaverse as a place where humans live, play and work in a digital reality, and where the digital reality interacts with the physical world. What makes the metaverse so compelling is that it provides a place for humans to escape reality, vent their emotions, achieve progress and achievement, and so on, with little to no risk. While the concept may be new to many, it has been familiar to video game players and creators over the past 30 years. After all, the concept of the Metaverse and its current form originated from video games. It is an online virtual world, built through layers of code, hosted on computer servers around the world, and legally owned by corporate entities. Due to the global pandemic of the new crown epidemic, many companies have adopted a mixed online and offline working environment. Short videos have replaced long videos in social media. Non-fungible tokens (NFT) and game money-making models have emerged. The entertainment world has also joined the trend - Travis Scott and Ariana Grande are hosting concerts to experience concerts online, with audiences far larger than physical venues can accommodate number of people.

At the same time, DBS Bank also raised the risks of the metaverse economy: (1) the creation of content fails to achieve the purpose, causing users to reduce or avoid continuing to participate in the metaverse; (2) digital identity theft and anonymity lead to inappropriate or criminal activity; (3) attacks and harassment in virtual worlds may be more difficult to police than existing social media; and (4) continued high inflation affects consumer discretionary spending.

2. The market prospect of metaverse economy is relatively broad

The Metaverse has a huge potential market. By 2030, the potential market scope of Metaverse opportunities is expected to be between 3 trillion and 11 trillion US dollars, and the actual scale of funds will depend on the digital economy share and market expansion transferred to the Metaverse. A 2017 report by Oxford Economics predicts that the digital economy will account for 25% of global GDP in the future, but DBS thinks it will account for about 20%, because the above report does not take into account current inflation, the new crown epidemic and other geopolitics The effects of tension.

The Metaverse will become a part of people's lives in the future. According to Gartner, by 2026, 25% of people will spend at least 1 hour a day in the Metaverse for work, shopping, education, socializing, and entertainment. By then 30% of organizations will be ready for Metaverse products and services. KPMG's survey forecasts are even more aggressive, predicting that by 2030, people will spend more time in the metaverse than in the real world, even as much as 15 hours a day. People will work, shop, socialize, and even have weddings in the Metaverse. The reach of the Metaverse may be enough to make people's digital lives more important than their physical ones at some point. Some users (especially younger ones) may end up earning, spending and investing most of their money in the digital world.

3. Content is king for successful metaverse products

The persistence of the Metaverse means that when users return, they pick up where they left off, ensuring continuity of usage. By default, content is live and continues to be available even when the user leaves the environment. For example, if a user purchases an outfit in the game world, he should be able to wear it in his social media world and also get an AR (touch-enabled) wearable experience in the physical world. Therefore, an immersive content experience is required. People watch Marvel movies to feel what it's like to be "Spiderman" or "Captain America" in them. Can the Metaverse allow people to spend more time with these characters and feel like they're real? Interactive experiences also bring more possibilities, scenarios and endings. DBS expects competitors to emerge across different categories of Metaverse offerings, including virtual experiences, virtual work, virtual property and support services. These companies can provide tools for augmented reality (AR), virtual reality (VR) and artificial intelligence (Al), but content is king when it comes to winning users.

Different business models exist in the Metaverse. There are three main categories: (1) incorporating the metaverse into existing business models to drive competitive differentiation (virtualizing production lines, or selling demos); (2) creating or orchestrating new experiences in the metaverse (tour

games, high-risk exploration, social participation); (3) provide the underlying infrastructure and components of the Metaverse. The first two types of business models need to focus on "content-driven" experiments. The premise of the Metaverse is to provide an experimental service that appeals to a wide range of human senses. However, these senses need to be engaged in a way that stimulates the imagination. Successful Metaverses will be those with excellent, immersive and engaging content. In order for the business model to remain sustainable, the content of the Metaverse should be able to continuously engage customers over time. Likewise, in the Metaverse, IP franchise owners like Disney and Nintendo (Pokemon) are strong candidates to be winners. It can be seen that it is not enough for Metaverse to only focus on realizing the virtualization experience, it must promote the completion of a deeper foundational work.

4. The multi-level metaverse is interoperable due to its decentralized characteristics

The metaverse is multi-layered, not a homogeneous space. Rather than a single homogeneous metaspace, the digital space will include a "multiverse" of metaspaces. Indeed, commercial considerations and platform competition will necessitate such a "multiverse". If these metaverses are not interoperable, customers will not be able to transfer their purchases between different platforms. Interoperability is critical to connecting multiple metaverses, it will enable users to freely switch between different metaverses, exploring different infrastructures, just like we move from one place to another in the real world Again, our identities and assets are always the same. With the development of the Metaverse, DBS expects that the value of digital assets will grow sufficiently large to attract the attention of financial service providers. In this case, interoperability and mediation between the Metaverse and the physical world will be crucial. This interoperability is as much technical as it is in the legal and financial spheres. Even simple transactions like asset transfers, such as moving gold between two countries, involve various legal and financial steps. The parties need to abide by the customs rules of both countries and declare the value of the gold in the local currency of the receiving country after accounting for taxes.

V. Financial service providers are inseparable from the content construction of Metaverse

DBS proposes an "inside-out" digital banking business model. This model primarily employs augmented or mixed reality capabilities to replicate the banking experience, customer engagement, and branding, embedding value-added financial services into the metaverse, including facilitating the exchange between digital and non-digital financial assets and flows. It is impossible for a financial service provider to produce enough attractive content to promote the "inside-out" business model itself. A credible “inside-out” strategy therefore involves financial service providers collaborating with content giants or IP franchisors and co-designing economic and financial interoperability between one or more metaverses and the physical world gender aspects into financial services expertise. The reasons for this are: First, financial service providers understand embedded finance and can design financial services into the minds of customers. For example, loan and guarantee schemes are inherently part of the home buying process, rather than existing independently; second, commercial competition will require a "multiverse". To further increase their value, these financial service providers need to be fully familiar with the "picks" and "shovels" of the multiverse. If the provision of financial services is not compatible with the metaverse and physical world, it will cause inefficiency. Financial service delivery will also not be able to thrive in the Metaverse if customer onboarding, anti-money laundering and sanctions tools remain non-digital.

How can financial service providers add value to metaverse content builders? Financial service providers are experts in economic and financial intermediation. Currency swaps were born out of foreign exchange controls; stock derivatives partly stemmed from foreign shareholding restrictions; securitization stemmed from the need to release potential value that consumes balance sheets and capital constraints; payment ecosystems stemmed from the need to improve efficiency on a large scale; foreign exchange and Interest rate markets emerge from larger underlying trading, hedging and risk management activities. According to DBS, financial service providers are prepared and have learned from past experience to meet the needs of users to "travel" between the metaverse and the physical world.

(Editor: Shao Zhicheng, Ph.D candidate, Institute of Area and Country Studies, Peking University This article is a compilation of relevant research reports, and has nothing to do with the position of the Institute of Area and Country Studies, Peking University. Please indicate the author's information and the source of the article when citing or reprinting.)