The rollout and evolution of 5G is being marked by discussions around open systems, innovation on top of platforms, decentralisation and coordination using blockchain or decentralised ledgers. During the decade ahead, and the evolution from 5G to 6G, these new developments look set to reshape the telecoms landscape and operating models.
Strikingly, the evolution of financial services and of the metaverse – fundamental to any future digital economy – are being underpinned by similar forces to telecoms’ own evolution and are liable to co-evolve over the coming decade. There are both lessons and opportunities in these that the telecoms market would be wise to explore, experts say.
Unreal Estate Agents
“Unless we have clear concepts of ownership, it’s all beautiful but it’s not really fundamental to progress,” Yat Siu, Chairman of Animoca Brands, commented last week of the metaverse. While technologists enthuse about the possible services and experience of an immersive alternate universe, discussions about fundamental challenges such as the existence of property rights in a digital environment are in early stages.
Siu was one of a variety of speakers at the Reuters Next online event, commenting on recent sales of online ‘land’. “Real land has value when people can be confident that it will persist in the future… and that your ownership will too”, he pointed out. In situations where, for example, revolutions make ownership unstable, or war is likely to damage or destroy property, its value plummets. The value of digital property, too, depends on confidence in the persistence over time and ownership of the property bought.
While people might point to blockchain as an enabler of property ownership, pointing for example to NFTs, this is not straightforward according to lawyer Sophie Goossens. “Ownership in legal terms means a monopoly over a legal resource that is enforced by the state,” she pointed out.
However, it is unclear whether any “state” exists in a wholly digital environment. Moreover, while physical ownership of an item gives the owner certain rights, these are not necessarily shared in a digital environment.
“The types of rights being granted by an NFT can differ,” Goossens, a partner at Reed Smith, noted, adding as an example that the “owner” of an NFT might not automatically have the right to alter or amend the NFT they buy, which would be the equivalent of buying a chair and being forbidden to reupholster it. In practice such limitations are rare, though, which is one appeal of NFTs. “People can innovate and add value on top of NFTs,” Siu said, “it’s like adding baby seats to your car or renovating a house.”
Siu pointed out that, on a blockchain, the “state” is effectively replaced by the holders of blocks, who are (in theory) able to manage by consensus. Granting, upholding or debating ownership is based on the stakeholders in the chain agreeing that such is the case.
(There are a couple of corollaries to this; namely, that only “property owners” have rights and voices in such an environment; and also that larger stakeholders have larger influence. Whether somebody owning, hypothetically, just over half the blocks on a chain can or should determine the status of the other 49% is an interesting controversy.)
Digital ID for Digital Times
Of course, questions of ownership in digital or immaterial environments are not new, and in particular the financial world has operated cashless transactions for years. There, digital identity is used as the basis for managing transactions.
Nandan Nilekani, Chairman and co-founder of Infosys, discussed the way that India has built on top of its Aadhar national identity platform to create their UPI, a unified payments interface which enables transactions without the need to enter banking details or other sensitive information in order to transact seamlessly, and which provides users with a clear single view of their finances across different accounts and cards.
The essence of the system and the key to its success, in Nilekani’s eyes, is its openness and its role as a public good. “When the basic system is essentially free, you can build on top of it very easily,” he observed, “innovation is going to a higher level.”
As an example, Nilekani noted the impact of having a coherent account of transactions. “These payments create a data footprint for loans, for example, so there are collateral benefits to the basic system.”
This openness means that, while a consumer may be able to access loans based on their digital footprint, it enables further innovations in the SME environment – for example, enabling food delivery firms to share data which would help lenders make decisions about loans to restaurants. However, the platform itself – UPI and the Aadhar identities – form the basis of that stack.
Turning Data Into Financial Benefit
Openness was also on the mind of Klarna CEO Sebastian Siemiatkowski, along with its impact on the financial services sector. “I believe this decade is going to be that disruption decade, just like we saw with e-commerce disrupting physical retail between 2010 and 2020,” he predicted. However, while India’s UPI is helping deliver greater clarity on consumer finances, Siemiatkowski anticipates a pushback in the other direction.
“I see a future where you wake up one morning and your digital assistant says ‘I looked through your mortgage tonight and I realised I can save you £10 by switching provider, and the only thing you need to do is say yes’.”
In this situation, data from the financial services providers is being made more transparent and users are benefitting from increased simplicity in moving money. For the financial services providers themselves, finance will be more of a commodity market and closer to an economist’s perfect market.
“We won’t see the same return on equity, we won’t see the same return on assets,” Siemiatkowski predicts, “the question will be what banks want to be or do.”
For Siemiatkowski, the answer is clear. “The best position to be in is the advisor in that situation because maybe as the consumer I’ll tip you five pounds for saving me that money.”
The implication is that banks can no longer focus on questions of return on equity in the same ways that they have done in the past, but instead banking becomes “more of a data play.”
“Not like what the tech companies have done, hoarding data for their own benefit or the benefit of their advertisers, but actually when consumers have decided to share data with us, how do we make sure that they get the maximum value for the data they have decided to share with us?” Siemiatkowski said.
Exploring all this, experts see the outlines of a future digital economy that can trade in intangible items just like physical products. Online environments are appealing today for a number of reasons, but growing economic inequality is certainly one of the drivers, according to Benoit Pagotto, co-founder of RTFKT (pronounced “artifact”), a maker of digital clothes built on NFTs. “The relationship between businesses and consumers is different online,” he pointed out. “Users are not just consumers anymore, they can add value in the chain.”
As mentioned above, plots of “land” have been sold already in potential “metaverse companies” such as Axie Infinity, a play-to-earn site with its own cryptocurrency. In June, CNBC revealed a number of Filipinos of all ages using the site to get by financially in the physical world. “People appear to play games, but actually it’s work,” Yat Siu observed. “As they play the game, the network effect they are delivering to play the game for free actually delivers value to the asset owners and to the community itself.”
With many countries experiencing widening economic inequality, this offers a new source of opportunities, a “wild west” for people to engage with. Physical properties in many countries are being priced out of younger people’s reach, but digital properties may be a way out for some.
Ultimately, however, there are a number of trends that emerge both from this and from discussions of future finance:
- There is a clear shift towards building platforms for innovation, whether that’s state-engineered payments and identity infrastructure or decentralised NFTs linked to cryptocurrencies.
- Some established business models are being overturned already with more to come, thanks to more accessible data and improving ways to interpret it.
- There is a shift towards more open systems, which carries its own elements of change along with it.
We can already see parallels in the 5G environment, where networks are starting to make the evolution from specialised hardware which connects users to the internet, to instead becoming networks of compute and storage power reshaping the nature of the internet itself. As a platform for innovation, telecoms players are in a position to take advantage of the changes.
However, as Siematkowski pointed out with regards to the financial sector, the nature of competition and how companies succeed will change drastically from a price orientation, and arguably telecoms players should too.
“If we can prove one day that people who bank with Klarna are less stressed and less worried about their finances, maybe even better off, that’s the competitiveness we need.”
Alex Lawrence is Managing Editor at 6GWorld. His mission is to bring together stakeholders from across industries, countries and disciplines to make sure that, as technology evolves in the coming decade, it’s meeting the changing demands of society, government and business.
He has been involved as a professional nosy person in the telecoms sphere since 2004, with short detours through industrial O&M and marketing.
If you’d like to talk to Alex about your ideas or projects he’d love to hear from you. @animalawrence or firstname.lastname@example.org.