What financial service providers need to know now

The term “metaverse” has meanwhile established itself for the next level of the Internet. As for this one: Horizon Worlds from Meta/Facebook. What is meant by this is a three-dimensional version of the internet – instead of experiencing it through a browser or apps, we should be able to dive immersively into the internet in the future. Even more than today, the payment process will be an important component of the user experience here. Sascha Münger, Senior Product Manager and Metaverse expert at Worldline, therefore investigates what financial service providers should pay attention to if they want to prepare for the entry into the Metaverse.

by Sascha Münger, Wordline (website)

Decentralized

F5 trillion dollars (source) – the Metaverse could reach that value by 2030, according to management consultancy McKinsey. The analysis also shows which usage scenarios are the main economic drivers:

  • E-commerce ($2.6 trillion)
  • Virtual learning ($270 billion)
  • Advertising ($206 billion)
  • Games ($125 billion)

This clearly shows that the topic of payment will be of central importance in the virtual world of the future. This is also underlined by projects which – depending on your point of view – are considered to be the first precursors of the Metaverse or already an implementation of the Metaverse: The blockchain-based 3D platform Decentraland allows users, for example, to convert money into the platform’s own MANA cryptocurrency and use it to pay for virtual properties, goods, and services. Brands such as Samsung, Atari or the auction house Sotheby’s have already created their first worlds of experience in Decentraland.

Lengthy checkout processes have no place in the Metaverse

Author of the metaverse: Sascha Münger, Wordline
Sascha Munger, WordlineSascha Munger

But the question arises whether and how many users actually want to convert their money into cryptocurrency in order to be able to pay in the Metaverse. After all, customers today already expect a large number of payment options from every large and small online store – credit card, SEPA direct debit, purchase on account/BNPL (Buy Now, Pay Later), PayPal, Klarna , Cash on delivery. Many purchases are canceled shortly before completion because the preferred payment method is simply not offered.

As a result, businesses should expect customers to make very similar requests in the metaverse in the future and lose revenue if they cannot meet them. And there is another aspect that should not be overlooked:

As part of an immersive experience, users will want to immediately use goods they purchase in the Metaverse, whether it’s clothing and accessories for their avatar, furniture for their virtual home, or a access to all kinds of digital experiences.

However, a long and tedious checkout process that requires entering private (payment) details, redirects to pages from various payment providers, and approvals through endless options menus unnecessarily delays the immediate experience and tests the patience of the user. Accordingly, possibilities such as “one-click payment”, in which the required payment information is extracted from the user’s account, should serve as a model. Sellers like Amazon have been offering them in their online stores for years. And in the gaming industry, microtransactions have become the norm: small sums that are quickly and easily transferred into a virtual environment to unlock new content. Since purchases in the metaverse are mostly made spontaneously, the microtransaction should symbolize payment in the virtual world.

New technologies implemented faster.

For financial service providers such as banks and fintechs, these events mean that the key to success lies in a high degree of flexibility and agility. They need to ensure their infrastructure is prepared for a wide variety of payment options and financial models. This also includes the fact that they also offer and accept cryptocurrencies. As already mentioned, many Metaverse users will probably continue to prefer classic payment methods. But cryptocurrencies are increasingly followed and this could stimulate the development of the Metaverse.

In order to be able to cope with this evolution, financial institutions must be able to rapidly implement new technologies. This is the only way for them to satisfy user needs in a timely manner and thereby secure advantages over their competitors. »

At the same time, they should work with regulators to ensure that privacy and security remain at the forefront of the development and adoption of new payment technologies.

There are still a lot of question marks in the design

In addition, financial service providers should work towards interoperability and open standards. Because the success of the Internet, of the World Wide Web, is also due to the fact that no one has a monopoly on access. As a result, it will now also be important that users don’t have to constantly switch between one metaverse and the next, possibly even while using different devices such as VR or AR glasses. Financial service providers, as important infrastructure partners, would do well to push for interoperability in their position – also to avoid having to set up their own infrastructure for a large number of metaverses.

Exactly what the Metaverse will look like in a few years – and whether it will actually reach the value of $5 trillion – is not yet predictable.

But the commitment of some companies, not just big tech companies, as well as early Metaverse projects are already showing the potential for a three-dimensional Internet experience world.

Financial service providers will play a decisive role in this, because goods will of course also be exchanged for money in the virtual world. Those who make the proper preparations now will not only be able to develop this new field of activity, but also actively contribute to shaping it.Sascha Munger, Wordline

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