With Facebook rebranding itself as Meta, many people have discovered the Metaverse as an alternative way to explore their interests and connect with others. But in addition to its recreational benefits, the metaverse also offers practical economic benefits, which can benefit the financially underserved.
The objective of the Singapore University of Social Sciences (SUSS) Inclusive Fintech Node is to study the latest and most relevant topics in FinTech for the benefit of society. His work involves exploring the potential of the metaverse and blockchain to drive financial integration and inclusion.
Dr. Lo Swee Won, Node for Inclusive Fintech Lead at SUSS, highlights how these technologies are rewriting digital economies and opening doors to financial possibilities.
How the Metaverse Can Drive Financial Inclusion
One of the Node for Inclusive Fintech projects is the Metaverse Lab, which examines how this digital replica of the real world can promote greater financial inclusion. The lab hopes to study how the metaverse will revolutionize the digital economy and change the way people transact.
Financially excluded populations refer to those who do not have access to mainstream financial services such as savings accounts, credit cards and loans. These groups are unable to obtain the resources they need to pay for higher education, a roof over their heads, or any number of other actions that could help them achieve a better quality of life.
The possibilities of the metaverse as an economic hub are endless.
The metaverse represents a new avenue for retail as non-fungible tokens flood the market. People are no longer limited to physical stores and online sites to sell their products.
Non-fungible tokens are assets on a blockchain with unique identification codes that distinguish them from each other. This makes any digital artwork or limited edition sneaker one of a kind. Since exclusive items are often expensive, therein lies the appeal of investing in these digital products.
For example, creators can design clothes for virtual avatars and sell their wares to the inhabitants of the metaverse, earning income from the transaction.
Apart from non-fungible tokens, the metaverse allows people to experience leisure in a different way and conduct financial transactions in this new space. “For example, one can visit the metaverse version of the Harry Potter world that is in London and go shopping in the theme park without having to move an inch from their desk,” shares Dr Lo.
How blockchain is transforming agriculture
Besides non-fungible tokens, the Node for Inclusive FinTech wants to explore other uses of blockchain and its impact on the economy.
For example, the blockchain company Sentinel Chain turns farmers’ cattle in Myanmar into tokens. The tokens contain livestock information, such as the age and weight of a cow, as well as the identity of the farmer.
Previously, farmers were unable to prove whether an animal belonged to them. This meant that if a cow died unexpectedly, she would lose all potential benefits associated with cattle.
But now tokens legitimize livestock owners and allow them to purchase insurance for their livestock. “If a cow dies, farmers don’t have to worry about loss of income, because the insurance will pay. This is a guarantee that was not offered to them before,” underlines Dr. Lo.
This technology also provides an additional layer of security as blockchain transaction records cannot be modified, making malicious modification unlikely.
Hackers would have to modify the entire chain to change a single token, as each record is connected to previous and subsequent data sets. This means that any information relating to the ownership of livestock by farmers is virtually set in stone.
How smart contracts will transform business transactions
Smart contracts are another example of blockchain technology transforming the economy. These are digital agreements stored on a blockchain and are automatically executed when predetermined terms and conditions are met.
“It’s a faster, more efficient way to do business because there’s no paperwork to deal with and no time spent reconciling errors that often result from manually filling out documents,” says the Dr Lo.
Also, since all participants have access to blockchain records, there is no need to wonder if the information has been altered for personal use. This helps cultivate a high degree of trust and transparency.
Dr. Lo mentions a case study where smart contracts automatically distributed digital assets such as relief payments as part of monsoon recovery efforts. This initiative has empowered people financially even in times of disaster.
In another example, smart contracts sped up and streamlined tax collection processes by checking whether tax data matched transactions made, Infosys wrote. This simplifies tax filing for people with low financial literacy.
Students create their own blockchain solutions
In addition to learning from real-life case studies, SUSS has held workshops that train students in coding smart contracts and building decentralized applications using blockchain technology.
A group of students helped small and medium-sized businesses secure bank loans by digitizing their physical collateral into non-fungible tokens. A collateral refers to something pledged as collateral for the repayment of a bank loan, such as a house or a car. By locking up the tokens as collateral, more people could borrow money.
Another group of students allowed creators to mint non-fungible tokens on the blockchain and channeled some of the proceeds from sales to support young artists in underserved communities.
SUSS’s Node for Inclusive Fintech will continue to explore different uses of metaverse and blockchain technology so that more people can participate in the digital economy and reap some form of financial gain. Inclusion is about having a voice, which fintech will amplify.