What is extended reality and how can it affect the banking sector?

Extended reality is an umbrella concept that encompasses augmented reality (AR), virtual reality (VR) and mixed reality (RM) technologies. "The term was coined to refer to a variety of tools that build on the same technological concept", explains Diego Laforga, head of communication at Isostopy, a company specialized in the subject.  The use of this innovation has not yet spread across the world, but is expected to become a full-blown trend in the future.  Between 2018 and 2022, the value of the business emerging around these three immersive technologies that blend the real and virtual worlds, is expected to increase by almost 700 percent, from US$ 27 billion to US$ 209 billion, according to Statista estimates.

Industry experts predict that medical businesses will benefit the most from this technology, followed by the military, industrial and tourism sectors, according to a special report by Raconteur on extended reality based on XRDC data. Virtual reality, augmented reality and mixed reality also have the potential to revolutionize business in other industries, such as fashion, entertainment or even banking.  But, what is the difference between these three technologies?, and what impact will they have on the financial sector?

Virtual Reality

VR technologies enable users to enjoy truly immersive sensorial experiences in a virtual world.  They require using a special headset and a pair of earphones to isolate the user from the real world.  There are two types of headsets: The ones that mount their own built-in displays and those with a slot for inserting a 'smartphone'. Both are equipped with sensors that track the user head’s motion to explore the virtual world. Some models also come with controllers that allow interacting with objects within that universe.

Virtual reality could mean a shift for banks and their way of interacting with customers.  "The new ways in which digital native generations - such as 'millennials' – interact are leading some financial firms to explore new ways of communicating with their users. In this sense, the concept of virtual offices or virtual customer service centers keeps gaining momentum," says Laforga.

The expert imagines digital renditions of physical offices where customers interact with AI-powered agents in the shape of an avatar, and without having to visit an actual physical branch. These virtual branches would allow customers to do their banking in an immersive environment just as if it were taking place in real-life office.

Augmented Reality

AR allows to overlay digital layers to a real-world environment, normally leveraging the cameras built into a mobile device, i.e. a 'smartphone' or a tablet. The Pokemon Go videogame or the app Snapchat are some of the most popular examples of this technology.

BBVA has pioneered the use of AR in the financial sector. The firm has developed Valora View, an app that leverages AR to offer users a new way to find a home to rent or buy. It is the first AR app released by a European financial institution. BBVA’s free-to-use tool is capable of offering users a recommended purchase or rental price for the specific property they’re looking at.

Are there any homes available in your favorite neighborhood?  To find out, all you have to do is go for a stroll and point your mobile device’s camera at the building or floor that you’re interested in.  The application and its smart AR system will retrieve information on any available properties (for rent or sale), provided that they are listed on the Idealista website.  The tool is capable of offering information on the types of properties in the area, as well as availability and price estimates. Users can use this information to negotiate the price of a property, having an approximate idea of how much they should pay for it.  In addition, the application offers a smart map to help users choose a home that fits their budget.

These types of technologies are emerging as great allies for banks, offering a more user-friendly way to deliver certain financial services and enabling easier ways to digest financial information, compared to the classic explanations on paper, explains Laforga.

A blend of realities

Finally, mixed reality combines VR and AR features.  "It allows overlaying virtual objects on a real-life environment, just as AR does, but enables users to interact with them".

Extended reality brings these three technologies (virtual, augmented and mixed) under the same arm.  Experts still disagree on when the use of these three immersive technologies will go mainstream. According to Raconteur, some analysts argue that this has already happened, while others that it will take place over the next decade.  A small group believes that this will never happen.

"There’s been a lot of hype around what was touted as the VR revolution, but it still needs a process of maturation," argues Laforga.  In Spain, over the last two years, extended reality businesses have grown 86.6%, according to the 2018 XR Report by The App Date, Oarsis and Fundación Telefónica. Industry players are currently focusing more on developing smaller, standalone headsets, on cutting costs and 'software' development. "This technology will replace mobile phones," concludes the Isostopy expert.