Hypothetical Payment Techniques in Metaverse

· The world of Metaverse?

The metaverse, dubbed the “new internet” by many, promises to alter the way we live our lives in the same manner that the internet did. In a nutshell, the metaverse is an online, parallel reality that allows people to construct their own universe. “Meta” is an abbreviation for “metaverse,” a term invented in 1992 by science fiction writer Neal Stephenson to describe immersive virtual places where users may play games, attend concerts, connect with colleagues, and purchase various digital goods and services. (NPR) Even though no one can say exactly what a Metaverse will look like, it does include virtual and augmented reality.

• Traditional payments about to extinct?

Each metaverse has its unique set of approved digital currencies, thus users must be aware of the payment methods accepted by the site before making any trades. Since these traditional methods work in the real world and fiat currency cannot be transferred to the virtual world, the possibility of converting to a virtual trading medium is the only option. We can think of the possibility of buying virtual currency with the fiat one, although the possibility of reversing the same might be difficult to execute. However, buying physical assets with virtual or digital currency is still in scope and a few examples can be seen in the present scenario.

· Payment in Metaverse:

The metaverse is still in its infancy, but it has a bright future. As blockchain technology and the metaverse evolve, we should expect a plethora of payment methods to become accessible to businesses and purchasers. Depending on the goods or services supplied, merchants can capitalize on the rising interest in the metaverse by taking cryptocurrencies and NFTs. The Metaverse has its own currency, called Tokens. It is predicated mostly on the previously described NFTs, which are just as vital as crypto. NFT is an abbreviation for Non-Fungible Token, which indicates that each token represents a distinct thing, with blockchain records storing information about the digital file. Because they can be quickly exchanged between users, NFTs have grown in popularity as a form of payment in the metaverse. NFTs are a strong technique for providing owners with evidence of ownership, a safe mechanism to transfer wealth, accessibility, and anonymity since they utilize blockchains similar to crypto.

In this system, new kinds of trust are accessible in the form of tokens for demonstrating and documenting asset ownership. Every digital asset (as well as smart contracts) is assigned a unique digital code, and every physical item is assigned a digital code that symbolizes it, which is known as a token. NFTs are a sort of digital asset in and of themselves, with a value that can be managed, sold, and owned.

We can say payments in the metaverse like in the real world, can be done in a variety of methods, but the most feasible and acceptable is through blockchain and digital currencies, which users can use to purchase products and services from businesses in the metaverse.

Blockchain technology can safely enable peer-to-peer payments (P2P) across a variety of digital payment platforms. The system provides immediate payment confirmation while also providing a high degree of transaction security and is readily adopted and expanded by the mainstream. Because blockchain is instantaneous, all digital assets acquired in the metaverse are processed and settled immediately. That implies NFTs, cryptocurrencies, and any other future digital assets that participate in the metaverse will be able to be promoted, exchanged, purchased, and sold in the metaverse. The transactions might be linked to a person’s blockchain-based payment wallet, providing a safe and quick method of taking payments. However, issues with blockchain technology may prevent this.

We cannot rule out the possibility of hypothetical payment techniques which are still in the theoretical phase or in the early development phase. For example, a voice recognition pattern, where saying the phrases “I will pay Rupees XYZ only with my credit card”, will auto-debit the mentioned amount from your card. These contextual-based payments are quite possible, and we can witness the same in the metaverse too.

Another possibility is that of biometric authentication, like a combination of face recognition, iris recognition, heartbeat analysis, and vein mapping patterns will prove the authenticity of the individual. This will also help in securing the payment with the data privacy software, making the end-to-end encryption intact.

Finally, the hypothetical possibility of sensory neurotic payment cannot be ruled out either. The fantasy to transfer the amount without even moving any of your body parts can also be exploited in the future. We have seen examples of devices operating based on your sensory reflexes, which can be linked to your bank account to transfer cash and make payments in metaverse too. Maybe your identity will be linked to your physical self too, making the process even smoother.

· Challenges and Solution:

While the metaverse has enormous promise, it is not without hazards. The possibility of fraud is a major worry for both organizations and users. Because the metaverse is still in its early phases of development, insufficient safeguards are in place to prevent cybercrime. Depending on the payment method used, users may be vulnerable to data theft, phishing attempts, and other types of fraud such as fake chargebacks.

Chargeback fraud happens when a credit or debit card is used to make a transaction and the buyer asks for a refund from their bank saying they were a victim of fraud or that they did not get the items. Merchants can use a legal defense to combat these false allegations, like Justt using a chargeback mitigation service.

Merchants may also choose to accept standard payment methods such as credit cards in most metaverse platforms. While this increases the risk for businesses, it also increases the chance of more sales because not all customers are comfortable utilizing bitcoins. However, because financial intermediaries have the capacity to reverse transactions, retailers will face increasing amounts of chargebacks and chargeback fraud, just as they do in the real world.

It is critical that both businesses and consumers are aware of the web 3.0 payment methods available and take the required steps to avoid fraud. Users may make educated judgments about where to spend their money and how to spend it by understanding the various payment options accessible.

Although the metaverse is still in its early phases of development, it is swiftly becoming a popular online shopping destination. As blockchain technology and the metaverse expand, we should anticipate seeing an increase in the number of payment options accessible to businesses and purchasers. Depending on the goods or services supplied, merchants can capitalize on the rising interest in the metaverse by taking cryptocurrencies and NFTs.

With fraud being a big worry in the metaverse, cryptocurrencies provide a simple and safe means to make payments that are less vulnerable to fraud than traditional payment systems. However, because cryptocurrencies lack the reach of credit and debit cards, the latter is expected to play a role in the metaverse’s early phases. Metaverse retailers may make educated judgments about what payment methods to offer in this fast-emerging market by knowing the risks and benefits of each payment method.

· FinTechs are the leaders of tomorrow:

Along with blockchain and cryptocurrency, we may expect digital wallets to play a role in metaverse payments. While cryptocurrency has increased in popularity in recent years, it has yet to be accepted by the mainstream. Digital wallets will be a payment alternative that will allow consumers to pay for digital items safely for individuals who are not comfortable putting their toes into crypto payments in the metaverse. While this will be an alternative to using cryptocurrency in the metaverse that employs blockchain technology, a crypto wallet may still be necessary to preserve digital assets acquired in the metaverse as well as transit them across metaverses (think of each metaverse as a google, safari, firefox, etc).

So in order to scale up quickly, FinTechs need to pull up their socks to bridge the gap regarding the following significant points:

1. Become trusted digital asset caretakers: Leaving individuals to look after their most important digital assets on their own is a recipe for disaster. Right now, people implicitly trust banks with their money. There is no reason why people should not put their money and digital assets in the hands of banks.

2. Provide virtual wallets that all customers can comprehend and utilize: If you keep your crypto, digital assets, and real-world money in the same location, it will be easier to build a digital wallet there as well.

3. Set the bar for secure, smooth “pay any way” transactions: Paying for something in the metaverse using a combination of money and cryptocurrency is now clumsy and cumbersome. Perfect trust between parties is frequently required. Banks may contribute to the development of the legislation, norms, and services required for the secure, quick, and frictionless movement of digital assets. Consider this: how can we construct the “Visa” of the metaverse?

4. Construct links between the metaverse and the actual world: It is now quite simple to spend fiat cash in portions of the metaverse. It is more difficult to transfer money from the metaverse to the physical world. Some early entrants are developing crypto-to-fiat exchanges and similar services, but banks might compete as well.

· Conclusion:

We have seen the transition to the Metaverse has already started and FinTech is already charged with the major disruption in this digitally advancing world. The possibility to connect the two worlds digitally and then strengthen the economy lies in the banking system. As discussed, some of the possibilities of the payment techniques seem quite obvious, while others force us to think about the possibility of non-existent systems in place too. Will such a world exist? What will it look like? Will it be better and more robust? Or everything will be replaced by an entirely new system? These are some of the questions yet to be pondered over.

· Reference:

- “Payments in a metaverse” by Dan Fernandez: https://thepaypers.com/expert-opinion/payments-in-a-metaverse--1253104

- “The Metaverse as a virtual form of data-driven smart cities” by Simon Elias Bibri & Zaheer Allam: https://link.springer.com/article/10.1007/s43762-022-00050-1

- “Web 3.0 Vs. Metaverse: A Detailed Comparison” by Ayushi Abrol Ayushi Abrol: https://www.blockchain-council.org/metaverse/web-3-0-vs-metaverse/

- “All One Needs to Know about Metaverse” by Lik-Hang LEE: https://researchportal.helsinki.fi/files/169348619/METAVERSE.pdf

- “How Metaverse will reshape FinTech and Payments”: https://www.paymentgenes.com/all-about-payments-videos/how-metaverse-will-reshape-fintech-and-payments