It’s hard to miss the growing hype around the metaverse. Enabled by advances in virtual reality and augmented reality, many companies like McDonalds, Adidas, and L’Oreal are going all in on the metaverse environment.
JPMorgan forecasts the metaverse could become a $1 trillion market opportunity in yearly revenue with an annual growth rate of 68%. If predictions are to be believed, few businesses will be left impacted by these innovative virtual worlds.
With all this money expected to be spent across the metaverse, the need for secure and frictionless payments systems will be vital. At such an early stage in the development of the metaverse, it’s yet to be seen exactly how digital payment processes and financial services will look. But it’s already clear that the underlying infrastructure will be very different to conventional payments solutions.
Payment Innovation
In the digital realm, transactions need to be completed almost immediately, and at any time. Not only do individuals expect payments to be quick, but they also expect them to be as secure as if they were purchasing in real life.
Investment bank JP Morgan recently became the first bank to enter the metaverse by setting up a virtual shop with a live tiger and portrait of CEO Jamie Dimon. With JP Morgan saying they see services like credit, mortgages and rental agreements being carried out in the metaverse, it is possible to see a future where buying a virtual house in a virtual world becomes the norm for many.
With physical cash being useless in the virtual world, blockchain and cryptocurrency based solutions are likely to play an essential role in the expansion of the metaverse. The high security of blockchain paired with the instant processing and settlement of transactions are clear benefits to embracing these technologies. As can be seen with digital assets like non-fungible tokens (NFTs), cryptocurrency is already being used in major transactions.
New challenges
There are clear regulatory issues when it comes to incorporating cryptocurrency payment solutions. But as the popularity of the metaverse increases, regulators will have to address the rules when it comes to tax and regulatory issues.
No matter what payment platform is used, it will have to be able to facilitate a range of transactions with ease, including cross-border payments, asset trading and payments between virtual worlds. Millions of in-game purchases happen in games like Roblox and Second Life on a daily basis, and as the connection between virtual and real expands, so do the opportunities for embedded finance.
McDonald’s recently filed ten trademarks with the US Patent and Trademark Office for a range of products, including virtual food and beverage products. Orchestrating a payment platform that is able to facilitate people in the metaverse ordering in the virtual world and having it delivered in person and virtually is no small feat.
With major brands and international corporations increasingly considering the benefits of having a presence in the metaverse, the payments ecosystem in the space is only on track to develop.
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Written by Finbarr Toesland, Editorial Contributor
The discussion continues on 26th April at Future Identity Finance, co-located with FTT Embedded Finance & Super-Apps at County Hall, London. Look out for panel discussions exploring how digital identity and trust will be applied to evolving models of decentralised finance.