Virtual reality is an electronic replacement for tangible material or actual events. It supplants a real environment of spreadsheets and meetings with electronic simulations of them.
The implications are staggering. VR could be a replacement for lots of the brick and mortar costs that banks have been incurring for years, ranging from somebody coming into a branch to open up a new account to providing investment advice or portfolio information, said Barry Elkin, a Chase Manhattan Bank vice president for product development who builds client information workstation products.
Virtual reality means that, eventually, face-to-face meetings can be simulated electronically so that the sights and sounds one normally experiences at real meetings or conferences will appear real - even though participants may be scattered in different places all over the world. Think of today's teleconferencing power but with charts, data, and other information graphically represented in a way that people sitting across the continent can work on simultaneously - just like a real meeting.
For banks, it also means that both institutional and retail customers could be offered an entire range of banking services using the Internet's World Wide Web to electronically send and receive text, images, and sound.
Just as the telephone altered the way business was done in the in early 20th century, virtual reality is already beginning to alter the way business is done today.
The only difference is that the two-stage virtual reality revolution will happen in 10 years whereas the telephone revolution took 50.
The first stage, transferring data in animated graphical form, is already under way. It is now possible for almost any computer to download animated, graphical information from the Internet's World Wide Web cheaply.
The second stage, three-dimensional virtual reality conference calls and animated portfolio reports that show changes and spot opportunities and problems as they occur, is coming very soon.
For bankers, an important question to ask before committing money to virtual reality projects is: What do banks customers really need now?
What they don't need now is the mimicking of reality that the military is interested in, said Borys Harmaty, a Bank of New York Co. vice president who, like Mr. Elkin, builds client information workstation products.
The real task of financial applications using virtual reality is to mimic how the human brain gathers financial information so that it can be presented in the same way the brain gathers it. Of the five senses - sight, hearing, smell, taste, and touch - only the first two are used when gathering financial information.
But some visionaries are already challenging that truism. One fanciful example of a total virtual reality scenario would allow a banker to smell U.S. bonds as apples going sour because there was no derivatives tarpaulin over the apple barrel on the porch of an old-fashioned farmhouse.
It's a neat way for a plan sponsor to look at his global portfolio.
But some question when such an application will catch on.
Virtual reality developers say they envision systems that can help managers measure risk and see the real-time value of their investments - not use virtual reality technology simply because it is there.
Virtual reality is important because it can present information in ways that parallel how the brain works. Why mimic the brain? Because human beings are great pattern-recognizers.
The idea is to let people see patterns that a two-dimensional chart might not reveal. Thus problems and opportunities can be highlighted more quickly than if the brain were asked to digest static reports or charts, search for patterns perhaps obscured by the ways in which they were made, and then conclude that something should be done.
In short, virtual reality can compress three steps - scanning, recognition, and concluding action is needed - into a single prompt.
Financial information developers such as Advanced Visual Systems in Waltham, Mass., already know how the brain works and are taking advantage of this knowledge.
Both are working closely with Sun Microsystems Inc., which has a state-of-the-art library of virtual reality objects that can be readily manipulated to create programs.
Advanced Visual Systems has several products that deal with risk management using financial pattern recognition. AVS can take your portfolio and graphically represent its current value or simulate what profit and loss might be, given certain interest rate moves, explained Jill Rubin, Sun Microsystems' global manager for capital markets in Mountain View, Calif.
The use of virtual reality will have several effects on the banking world. One is a standardization of the way in which financial information is presented and thought about.
Remember when you were a kid and you could tell there was a difference between being in the California and Florida because there were different foods? Mr. Elkin asked.
It's not that way anymore because of fast-food chains.
He imagines virtual reality will foment a homogenization that will make such programs easier to use. For banks, he thinks this is a plus.
Every business line in banking today has a 'G' for global in front of it, Mr. Elkin noted. VR, the electronic simulated environment, will simply make doing business globally that much easier.
Another use of virtual reality will be to increase standardization of financial data and the way it is presented.
A third will be increasing the speed with which business practices are put into place.
The ways in which settlement occurs globally, money is transferred, credit is assigned, or payments are made will change more quickly. Mr. Elkin suggested that, Someday things like . . . committees that take months and years to codify clearance and settlement practices may go away because things will happen too quickly for committees to react.
Just several months ago, virtual reality was thought to be years away. But the first stage is firmly in place. Key to this is a recent breakdown of proprietary operating systems.
Over the past four years, a team of Sun Microsystems programmers led by James Gosling produced Java, an elegant operating program a mere 64,000 bytes long (Window 3 has about 5.5 million bytes).
Data, even graphical programs, can be sent to any operating system - DOS, Macintosh, OS, Unix, Windows, or whatever - in applets, discrete groups of data each of which has its own operating system that tells a receiver's operating systems what to do with the data.
Java permits easy movement of sophisticated data anywhere, said Wilson Davis, a New York-based partner in charge of Price Waterhouse's securities industry consulting group.
Java has happened so quickly many people are just learning about it.
Thus, strategies to take advantage of it are just now being devised. To some, particularly those whose futures are dependent upon the present proprietary operating systems, this is very scary.
But Mr. Elkin is not worried. The rate of change in presenting information will continue to accelerate just as it has been for the last 15 or 20 years, he said, so I imagine we will continue to improve our products constantly just as we have been doing.
Desmond MacRae is a freelance business writer based in New York.
