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Virtual and Augmented Reality in Commodities?

Last summer, when we undertook the disruptive technology survey, we asked about investment plans and adoption of VR and AR. The view seemed to be that most felt that VR and AR would have no impact on commodities software and technology at all. A very small number at 5% saw it as potentially having impact and the same number said they planned to invest in the technology. We were also hard pressed to find any use cases for VR and AR at all but keying in on things like data visualization, virtual desktops, user training and potentially also in trading, though we saw little in terms of demonstrable progress in any of these areas at the time of writing. For us, writing the report this last summer, it seemed that VR and AR were a long way off in terms of meaningful application in the world of commodity technology.

However, in conversation this morning with Mark Tredway over at Enuit, the topic came up. He’d been doing a bit of research in the area and talking with others informally apparently on the topic of what might CTRM software look like in a virtual world? I confess, I am not too turned on by VR and AR. Perhaps I am getting old but I don’t quite understand how operating in a virtual world beats operating in the real one? So I decided to do a bit of research this morning and to see why VR and AR may be the next big thing.

The first thing I discovered is just how big this whole area is forecast to become in the next few years. Technology analysts agree that this will be a huge area of expenditure for firms in the coming years. Markets and Markets see robust growth stating,

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The virtual reality (VR) market is projected to grow from USD 6.1 billion in 2020 to USD 20.9 billion by 2025; it is expected to grow at a CAGR of 27.9% from 2020 to 2025. The increasing demand for AR devices and applications in healthcare, rising investments in AR market, and growing demand for AR in retail and e-commerce sectors due to COVID-19 are the key factors driving the AR market growth. The availability of affordable VR devices, growing adoption of HMDs in different industries, advancement of technologies and growing digitization, penetration of HMDs in gaming and entertainment sectors after COVID-19, and high investments in VR market are the key factors driving the VR market growth.

Others see much greater growth – Heather Bellini, analyst at Goldman Sachs, for example,  has said that the VR industry could reach $80 billion by 2025 and it will go beyond entertainment and gaming, which are the two main aspects of virtual reality at the moment. Others project even larger numbers and and eye watering rate of growth.

Yet, where would this technology be applied in commodity trading? And what exactly is it anyway? Well, according to Investopedia, Augmented Reality is “an enhanced version of the real physical world that is achieved through the use of digital visual elements, sound, or other sensory stimuli delivered via technology. Virtual reality immerses users, allowing them to “inhabit” an entirely different environment altogether, notably a virtual one created and rendered by computers.”

Perhaps part of the reason for the lack of enthusiasm in our survey is the need for new hardware requiring a funky looking headset, for example, and a better graphics card. The headsets are very pricey. However, some are already looking at trading apps and former Morgan Stanley analyst, Andy Maggio, told CNBC in an interview, “I believe VR will be the most transformative technology in our lifetime.” While Maggio admits the technology isn’t quite ready for prime-time, he says the quality of the technology is rapidly improving. “The resolution is double what it was five years ago, the hardware is moving forward very quickly, it’s lighter and easier to use.In the same article, former hedge fund manager and Glimpse Group CEO Lyron Bentovim sais. “Wall Street is slow to adapt, but this is the future of trading,” arguing that a trader can see usually six to eight screens at the most in the physical space. “You’re limited,” he said. With VR you’ll be able to see and interact with dozens of screens and layer data upon data. “I can see a trader observing multiple trends and then immersing him or herself in the data without being constricted by physical limits,” he said. Testing of the technology though had a downside in that it apparently made traders nauseous.

Despite the set backs and limits, VR/AR is very close to a major breakthrough with the cost of headsets set to decline rapidly as they themselves become more like normal glasses. Not only should this make the hardware more wearable and less costly but also more deployable. There is talk of the smartphone being replaced with such glasses and the technology becoming common. It seems to be just a matter of time.

VR and AR first will allow traders to break out of a physical space and to be able to customize data and research. They will be able to see that data in 3D and be able to control for size and color, and overlay data on top of other data. But will VR and AR replace CTRM solutions or trading exchanges? Although I’d like to say not I suspect they will enhance the user experience allowing data manipulation and visualization to improve, possibly allow fundamental changes in which traders can examine the commodity they are dealing in (if it is a physical commodity like sugar, nuts, coal etc.), examine the actual transportation vehicle, see and execute documents, hold meetings and much more besides. I can imagine it changing how business is conducted all along the supply chain sometime in the future and the software that people interact with to manage that supply chain.

How far away is this? Well, while it seems like SciFi, it isn’t that far away technologically . Its probably more a question of how fast a naturally conservative industry chooses to adopt it. Oh and I will be keeping up my research into this area so there will be more articles on VR/AR here ….