The internet and World Wide Web have radically changed the way accountants work and transact business. This transformation has accelerated over the past decade as firms have adopted cloud computing, allowing them to collaborate virtually as effectively as in person.
More change is on the way. New technologies are emerging that will empower the internet’s next evolutionary leap. Dubbed by some as Web 3.0, the next iteration of the internet may bridge the gap between the real and virtual worlds, further enhancing the ways we work and conduct business.
Web 3.0 will be powered by a convergence of technologies creating the metaverse (explained in more detail near the end of the article). It is not yet certain which technologies will fuel Web 3.0, but artificial intelligence, blockchain, decentralized finance, and virtual reality already are inching their way into various aspects of daily life. And while we don’t yet know the timeframe for this meta-evolution, the time has come for CPAs to become aware of what these changes may be and how they could reimagine the way business is done in the next decade.
To best understand Web 3.0, it helps to know how the web has evolved so far.
Web 1.0: The internet originally emerged from military and university research projects that called for the development of a decentralized digital communication platform with no single point of failure. Few people outside of academia regularly accessed the internet beyond email until the creation of the World Wide Web (www.) made it useful. This first web iteration was basically defined by static websites where people could search for and view information. There was minimal two-way interaction with these initial websites, aka “billboards on the internet.”
Web 2.0: In the late 1990s, rich web technology was introduced that allowed user-generated content to be included, shared, and interacted with on websites. Companies such as Facebook, Google, Amazon, and Twitter captured this user-generated content in their centralized databases, which they now “owned and monetized” in exchange for users having “free” access to use those applications.
Accounting firms took advantage of these rich, cloud-based technologies and still do in the form of today’s application suites, collaborative tools, portals, and other dynamic content allowing input from users both inside and outside the firm. The internet became a place for accountants to collaborate and conduct business virtually on an anytime, anywhere basis.
Web 3.0: The next generation of “rich” technologies -- including machine learning, blockchain, and virtual and augmented reality -- will intelligently automate many interactions without accountants having to specifically direct the systems to do so. However, while automation is key, Web 3.0 also is expected to have an emphasis on decentralization and the individual, rather than third-party ownership and control.
With Web 3.0, individuals would own their content and determine who they wish to share it with instead of ceding ownership to corporate entities. Rather than external organizations controlling all this data in their centralized/owned databases, Web 3.0 would run on a decentralized infrastructure similar to how digital assets like bitcoin operate on blockchain technology. This version of the web would be managed decentralized under an entity often referred to as a Distributed Autonomous Organization or DAO.
Below we describe how key Web 3.0 tenets and technologies could create new ways to work between the physical and virtual world, as well as potential indicators of how their convergence could impact the accounting profession.
Autonomous: Artificial intelligence (AI) and machine learning (ML) tools can codify transactions automatically when they occur, rather than a human having to do so. As these tools evolve, they will greatly reduce the manual work required in accounting and also warn accountants of anomalies, e.g. when a purchase is suspect or out of policy, or if another approver is required. Even today, machine learning-powered accounts payable systems can scan physical or virtual receipts and automatically code them to the appropriate account, only flagging unrecognized anomalies.
Automation using AI and ML is a key evolution that Web 3.0 is expected to incorporate into the future web.
Blockchain/decentralized finance: Decentralization of data is another of the key tenets of Web 3.0, e.g., blockchain technologies will be utilized to eliminate traditional middlemen (financial institutions and third parties) charging fees to facilitate transactions. This is being referred to as decentralized finance (DeFi) and will also integrate “smart contract” technology so that when an agreement’s terms are met, the contract’s requirements automatically are fulfilled. For accountants, this could mean that when a tax return or financial statement is delivered, accepted and signed by the client, filing and payment could automatically occur.
Virtual reality: Most accountants are familiar with video conferencing technology in apps like Zoom or Microsoft Teams relaying depictions of participants onscreen, often in their home or office. Virtual worlds and virtual reality occur in fictionalized computer-generated environments. If you have ever played a video game, you have entered a “virtual world” that allows for interaction, usually via a two-dimensional video screen.
Virtual reality headsets add another dimension to the interactions. Players can move their heads to “look around,” and the display will present the virtual world as if they physically were in the game.
The movement of accounting conferences online due to the COVID-19 pandemic resulted in the deployment of a less immersive form of virtual reality to try to replicate some of the interactions that happen on site. Accountants attending a conference online were represented as avatars in a virtual world where they could move around to explore the digital conference site, socialize with other accountants, and attend sessions for CPE.
CPA firm Prager Metis and software vendor CCH-Wolters Kluwer have purchased “virtual” real estate in digital worlds such as Decentraland and Sandbox with the intent of interacting with clients and prospects virtually in the future.
Augmented reality: Do you have a head-up display in your car that lets you see your speed without lowering your eyes from the windshield? Or have you used an app that allows you to point your cell phone at the night sky to identify a constellation? Both are examples of augmented reality, which is created by technology that combines the real world and computer-generated content. For example, some retailers use augmented reality to project clothes onto a screen/mirror so customers can view how they would look in certain outfits.
Accountants could use augmented reality technology to project useful components of the tax code inside their eyeglasses in real time while talking to a client. Web 3.0 tenets include the delivery of useful information to recipients in multiple formats in the real world, the virtual world, or an augmented variation.
Metaverse: Often described in conjunction with Web 3.0, the metaverse is a general term that encompasses the various technologies described above to bridge the gap between the physical and digital worlds. While gaming is driving much of the innovation in the metaverse, tech-savvy users are already conducting virtual business with both real currencies and crypto assets – a trend that is accelerating rapidly.
While rapid technological evolution can seem overwhelming, accountants should not fret. We have endured the transition from physical documents to desktop applications to the use of the cloud and even collaboration via our smartphones. Just as CPAs adopted these innovations when business and clients demanded it, the same will be for Web 3.0 as those technologies evolve and prove themselves.