S'pore company banks on Second Life

Startup First Meta will set up a bank in the virtual community, offering services similar to the physical world including credit cards and corporate financing.
Written by Eileen Yu, Contributor on

SINGAPORE--A local company will become the first to offer a range of banking and financial services currently not available in virtual world phenomenon Second Life.

Established in February 2007 and one of the first Singapore-based companies to set up shop in the virtual community, First Meta will become the first virtual bank to provide credit card and corporate financial services in Second Life, where current banks are mostly small and offer only deposit services, said First Meta CEO Douglas Abrams.

"We're treading on new ground and one of the early Singapore-based business entrants to open in Second Life," Abrams said in an interview with ZDNet Asia, explaining that the company's initial idea was to provide financial services for games that thrive on virtual communities. Abrams is also the founder of Expara, which provides leadership consulting and training services, and the founding partner of Parallax Capital Management, a funds management company based in Singapore.

"I saw an article which talked about people who were trading game currencies like Simleons [used in The Sims Online], on eBay in exchange for real-world currencies… So, virtual currencies can actually be consumed like real money," he said, adding that he then spotted the business opportunity which spawned First Meta. "Many would agree that banking [in the physical world] is one of the most profitable businesses you can be in."

The startup decided to focus solely on Second Life because of the latter's phenomenal growth and increasing popularity, where the virtual world now boasts a population of over 6.6 million residents who exchange millions of virtual dollars each month.

In Second Life, participants can create their own content, buy, sell and trade with other residents, and even buy plots of land.

According to Abrams, First Meta will issue credit cards to Second Life residents and offer commercial banking services to merchants and property developers in the virtual world.

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He explained that his company will operate on revenues earned from interest rates, based on Linden dollars--the unit of trade used in Second Life. Revenues reaped in Linden currency will then be sold for real-world currency, be it in Singapore or US dollars, he added.

At press time, the exchange rate for the Linden dollar stood at 267.5 for one US dollar.

"As long as people make purchases and charge on our credit cards, we'll make money," Abrams said. "Our profits are collected in Linden, and we'll convert them into real-world currencies whenever we need to."

MDA dishes out funds

Singapore's Media Development Authority (MDA) announced Friday that it has set aside S$40 million (US$26.2 million) to fund R&D initiatives in the interactive and digital media (IDM) sector. Startups or individuals with viable business ideas can receive up to S$50,000 (US$32,750) through the funding scheme, which the MDA is hoping will seed some 750 projects over the next five years.
To date, 40 proposals have been submitted--including one from First Meta--detailing ideas ranging from Web 2.0 sites to mobile applications. Interested applicants can visit MDA's Web site for more information or e-mail: idm_office@mda.gov.sg

Aileen Sim, vice president of First Meta, added that part of the revenues--in Linden dollars--will also be used to pay for the company's operational or administrative costs.

When asked if he is concerned virtual communities such as Second Life could just be a passing fad, Abrams replied: "There's always a risk but we feel it's a reasonable risk since it's more likely that [the business] will grow, than not. Our view is that the virtual world will grow, and will [continue to] grow at a faster rate."

He noted that historical trends indicate people are spending more time in the virtual community, on tools like IM and online forums, and virtual worlds are a natural extension of the Internet evolution.

Sim added: "The use of virtual world is also extending into a platform, once primarily used for entertainment, that's now also used for communication and collaboration purposes."

The two executives are also hoping to expand their offerings beyond Second Life and into other virtual communities. Abrams said: "Our vision is to be the most successful financial service provider across all virtual worlds."

According to Sim, First Meta plans to buy an island in Second Life and will launch its credit cards in early-third quarter this year, with other products to follow. And like real-world banks, customers will be screened and checked for their credit worthiness before they are issued credit cards, she said.

Customer data will be separately hosted and secured on a server owned by First Meta, which adopts a security infrastructure--that includes data encryption and authentication--similar to one used in a real-world banking environment.

"Core to our operating philosophy is accountability and transparency, because there needs to be trust in a banking environment," she explained. "But there's a perception that people are anonymous in a virtual world and, therefore, there's a lack of trust. [To address this], we'll publish our real identities on our Web site and alongside our avatars [used in Second Life]."


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