Contrary to popular belief, the term metaverse has already been around for a few decades. As it sometimes happens with technology, fiction moved ahead of the facts when Neal Stephenson introduced the concept of a metaverse in his science fiction novel Snow Crash in ’92. Stephenson created a 3D space that mirrors the real world, in which people interact via avatars, and he presented it as a successor to the internet as we know it. Fast-forward to 2021, and the metaverse resurfaces, thanks to Mark Zuckerberg, who announced the transformation of his social media company into a metaverse company and hence rebranded it as ‘Meta’.
Science fiction story
Gaming companies and tech giants also created their own metaverse. My view on the metaverse concept is that ideally, metaverses would form immersive online digital environments, open to all who want to use them, and ideally serve commercial and non-commercial purposes. Given the importance of staying relevant and keeping up with developments in the innovative space, the financial services sector can’t afford to lag behind. It’s only a matter of time before the metaverse permeates our sector, as we are committed to cater for the evolving needs of our customers. If consumer activities, such as shopping and banking, move to the metaverse, the question arises: where do payments and digital currency fit in this ‘otherworldly science fiction’ story?
That is what one of this year's EBAday sessions discussed. In his Challenge Speech named ‘Metaverse, Digital Currencies and Payments’, Rohit Talwar, futurist, author, and CEO of Fast Future explained metaverses will play a role in the payments industry. This was a relevant and interesting session to follow, as Worldline conducts cross-functional research and development on this topic and is building a presence in the metaverse. An important insight that stayed with me from the session is that we live in a world in enormous transition.
How to pay in the metaverse
Paying for goods or services in the metaverse is a different ball game than payments in the ‘real’ world. We will see a lot of payments based on blockchain, digital currencies or non-fungible tokens (NFTs). This has some significant advantages. As the metaverse knows no physical borders, users can send and receive payments from or to anywhere on earth, thereby eliminating the difficulties that arise from exchange rates and logistical challenges. In addition, digital currencies in the metaverse are known for their swift handling of payments, limiting the transferring speed to seconds. The metaverse could therefore increase the need for micropayments, as they make it easier for anyone who wants to participate. Clearly, the metaverse came at the right time as the popularity of these new payment methods has already skyrocketed.
Enhanced use of the metaverse and digital currency is a two-way street
As the metaverse gains popularity among consumers, a greater proportion of their lives will occur online. Maybe you’ll be in a virtual office, vacationing on a digital island or shopping in a metaverse clone of a store. While for some this still sounds like a fun gimmick, recent studies suggest that the metaverse could potentially contribute $3 trillion to the global GDP within a decade if its adoption evolves in the same way mobile technology has.
There is a significant role to play for banks and fintechs to make sure that their IT infrastructure is prepared for an investment in digital currency and financial models that rely on multiple payment rails like blockchain. Financial institutions with a forward-looking view will realise that if the metaverse is as vast as predicted, being flexible and agile with their own policies is the key to success.
Navigating users to safe payments
Even if the metaverse is not adopted en masse in the end, expectations are that the future of payments might for a great part be dominated by digital currencies. To address this growth correctly, financial institutions face two big challenges. One is implementing technology fast enough, and the second is the ability to push regulators and the industry itself to ensure that privacy and security remain paramount in the development and adoption of new payment technologies.
These factors are key, as the tendrils of fraudsters also reach deeply into the veins of the metaverse, creating security concerns for consumers and businesses looking to spend their money there. By making sure that we – as financial service providers and facilitators of payments in the metaverse – are aware of the risks and have a clear sense of how to act on them, we can help users navigate their shopping adventures in the metaverse and make sure this science (non)fiction story has a happy ending.
Gaining a foothold
Although the metaverse might be still a vague concept – especially in the payments industry – Talwar's advice to banks is to be open to learning as it might be time to learn new dance routines. Don't be afraid to think about what will happen to you (and the industry) in five to ten years and develop scenarios for Banking 3.0 and pursue meaningful pilots.
At Worldline, innovation is part of our DNA, and we are committed to welcoming all-digital payment initiatives. It is therefore no surprise that Worldline is one of the first payment service providers to enter the metaverse with the launch of a dedicated virtual showroom. This popular and central location will enable us to involve and engage our network of merchants in metaverse activities by providing a platform and creating genuine value and customer exposure for them. The coming years will prove to what extent the metaverse will gain a foothold, not only in the financial sector.
Learn more about our efforts: Worldline enters the Metaverse to bridge the gap between virtual and real worlds for commerce scenarios.