Paying in the Metaverse: Opportunities and Challenges

With the Metaverse economy expected to reach $13 trillion by 2030, financial institutions are already beginning to explore the opportunities and profits associated with it. JPMorgan is among the first to carry the torch. The bank recently opened the Onyx Lounge in Decentraland, one of the most popular virtual worlds.

Paying for digital assets will be key to creating a seamless user experience. To ensure seamless virtual commerce, each digital environment, as well as the metaverse as a whole, must have its own digital economy, and robust payment methods are key to a fully functional masterspace.

Pillars of Payments – Security and Confidentiality

In real life, the financial sector already has its full hand when it comes to maintaining security. 2021 was relentless, and the number of cyber threats continued to rise throughout the year. In 2022, the industry faces the same or even greater challenges. As the online world is already under endless cyber attacks, the problem in the metaverse will only get worse.

According to Simas Simanauskas, Director of Partnerships at ConnectPay, the credibility of any virtual world will largely depend on the latest security, which also applies to payments.

“Any wallet functionality requires authentication security standards close to the Secure Client Authentication (SCA) used in Europe – anything else risks emptying your clients’ wallets in a matter of minutes,” the expert explains.

SCA law mandates two-factor authentication for all online transactions and contactless payments within the European Union to add an extra layer of security.

He also noted that while blockchain-based payment methods are expected to dominate, it is likely that a large number of Metaverse users will not have cryptocurrency balances.

“Chances are that users will simply want to shop with their cards or other familiar methods. Familiarity will be key as users need to be able to select a payment method provider before they can be trusted with sensitive transaction data – so this is a good time for established fintech companies to flag up in the metaverse”.

Banks target virtual real estate

The virtual space can help bridge the gap between traditional banks and their customers, who will no longer need to visit a physical bank branch. Instead, they could have the same interactive experience in the metaverse. However, Simanauskas does not believe that this is the main area that banks are looking to take advantage of.

“People don’t usually associate making finance with entertainment, and seeing how banks have moved to one-on-one meetings online, I don’t see the field taking off. Instead, traditional banks can seize the opportunity to fund and facilitate trading within the metaverse and with digital real estate.”

The value of the virtual lots in Decentraland skyrocketed – a lot went for $20 in the first auction. In 2021 it sold for an average of $6,000 and in early 2022 the price went up to $15,000. Last year, the four major metrics sold $501 million worth of land, and if the current pace continues, it could reach nearly $1 billion in 2022.

“Virtual space is an amazing asset and I wouldn’t be surprised if it was funded by banks in the future,” Simanauskas noted.

Fintech to lead the Metaverse

For fintech companies, the Metaverse seems like a natural hub, aligned with their digital-first nature. They are in a better position to lead the market because, unlike banks, they do not have to go through miles of bureaucratic hurdles and have more flexibility to come up with new solutions. To reap these benefits, Simanauskas advises building brand awareness and preparing to replicate itself quickly as various regulations come into force.

“Fintech and Covid-19 have moved branch banking to the web and mobile. Now, Metaverse promises to take people out of their living rooms into next-generation virtual space. If it succeeds, there will be a whole new market for payment service providers, and well-known brands will be The first to benefit from the new order.”

www.connectpay.com

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