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The Future of E-Commerce Payments in the Metaverse

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The metaverse is the latest buzzword everyone is talking about. However, is it an effective sales channel for retailers? The answer at the present time for most is no. To succeed, there are obstacles to get beyond. Payment processing is one of them.

In reality, all payments — aside from exchanging cash at the point of sale — are now virtual. Even though a business may believe it must accept alternative payment methods in the virtual world — such as cryptocurrencies like Bitcoin — using cryptocurrencies for payment transactions in the metaverse is fraught with difficulties. Why?

Crypto and Other Digital Currencies for Payments

Working with cryptocurrencies can be trickier for businesses than with conventional payments. With cryptocurrencies like Bitcoin, the value changes. Additionally, they are unregulated; and many customers do not prefer using these as a form of payment because they are not widely utilized or trusted by consumers.

Digital currencies in the category of stablecoins have less volatility through backing with fiat currencies (although even this is questionable), but still no regulation, yet.

While many countries are developing central bank digital currencies (CBDC) and they currently appear to have the most trust of these types of payments, the Federal Reserve has not yet decided on whether to pursue or implement a CDBC.

Another digital currency that can be considered for the metaverse is a closed loop payment. These are payments by “coins” or “tokens” that would only work in this specific environment. The same principle exists in clubs and vacation locations, but, in the digital realm, they are also currently used in online games like Fortnite, where you can buy “currency” upfront and spend it only in this environment.

Closed loop payments are mostly offered to distract the user from the awareness of spending real money. This takes place in games where the user can buy gear and pay with game-only “currency.” While this payment is simple, it contradicts the general idea of the metaverse because it is only valid in special shops, not in the whole sphere.

Further, to make gamers spend more, typically there is a significant discount scale based on the amount someone buys. For example, spend $100 to get $1,000 worth in digital offerings. This won’t work in the case of real-world items being purchased in the metaverse because it is not feasible for merchants to offer these kinds of major discounts.

Traditional Payment Methods With BiometricsĀ 

When it comes to payments in the metaverse, traditional payment methods are a good option. Additionally, in this virtual environment, biometrics can be used to authenticate these payment methods.

By 2025, about 1.4 billion people are expected to use facial recognition technology to authenticate a payment, more than twice as many individuals who did so in 2020, according to Juniper Research. There are several good reasons why it makes sense to deploy biometrics technology, especially in the context of the metaverse.

In a virtual environment it is far simpler for consumers to pay with their voice than to determine how to type long passwords. Consumers value speed and convenience, and retailers want to satisfy their needs while facilitating secure payment transactions to reduce the risk of fraud. Therefore, it is clear that biometrics should play a significant role in facilitating payments in the metaverse.

What should retailers consider? Consumers will need to be able to complete payments easily and seamlessly. Here are some ways to accomplish this:

  • The payments platform underpinning the payments process should be able to recognize devices consumers are using in the virtual world.
  • Include payment methods with a straightforward user interface, such as Click-to-Pay, Apple Pay, and PayPal.
  • Examine payment options that let users authenticate with voice recognition, eye scans, or both (once 3D goggles support this).
  • Consider payment options and providers that support delegated authentication. With this, retailers can take over the authentication process and inform the issuers that the authentication has been executed so they do not have to do it again. This can make it easier for merchants to handle the authentication somewhere else in the customer journey and not necessarily in the sensitive checkout process.

What Does the Future Hold?

Investments in this virtual world are growing. Mastercard recently announced that it is testing new technology that is intended to operate in the metaverse and allows customers to make biometric payments using their face or hand. Capital One’s recent announcement that it will enter the metaverse with virtual credit cards and non-fungible tokens (NFTs) further supports this.

Additionally, Meta has changed the name of its Facebook Pay service to Meta Pay, most probably with the intention of dominating the metaverse’s payment system. However, this could be combatted with companies like Mastercard being a member of the Metaverse Standards Forum, where many organizations are gathering to set the standards, not leaving them only with Meta.

With all this activity, vendors of payment solutions will undoubtedly travel the route to the metaverse as well. While it is conceivable to accept payments to increase the effectiveness of the metaverse as a sales channel, careful planning and implementation are required that are ultimately centered on the user experience — and biometrics will likely be a key factor in that.

Ralf Gladis

Ralf Gladis is Founder and CEO of Computop, a provider of global payment solutions and fraud prevention to over 16,000 merchants with a yearly processing volume of $34 billion.

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