How to get metaverse payments right in 2023 and beyond
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The metaverse will continue to open new frontiers of opportunity in 2023. It is no longer science fiction, but a place where top venture capitalists like Verizon Ventures are making investments and hundreds of brands are already operating, with many more likely to follow.
As the metaverse market is projected to grow to more than $426 billion by 2027 — and with Meta recently announcing it will double down on its investment in the metaverse — more organizations are thinking about how to build improved multichannel e-commerce experiences that better capture opportunities in the immersive virtual world.
The possibilities of the metaverse are still coming into focus for payment enterprises. Embedded finance, open banking and banking-as-a-service could all potentially benefit from the metaverse. This will also mean that competition will be tougher than ever. By experimenting with what consumers respond well to, businesses can edge past their competition by creating new products, services and channels in the metaverse.
As more businesses venture into the metaverse, here are three observations that payment players, merchants and FinTechs should consider when designing platforms to optimize revenue and enhance customer experience.
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Build strong platforms to earn customer trust and gain adoption
Before businesses can dive into the metaverse, they will have to overcome certain infrastructure challenges. Business leaders need to understand what plug-ins and APIs their organizations will need to support to enable smooth consumer experiences.
Investments in infrastructure are needed not only to ensure smooth consumer experiences but to instill checks and balances and fend off cyber and fraud risks. The more data that is available, the greater the privacy risk. On the flip side, if businesses can enforce tighter verification standards through processes like Know Your Business (KYB) and Know Your Customer (KYC), customer trust will increase, enabling firms to use data to innovate, predict trends and improve the consumer journey.
Businesses need to remember that consumers are accustomed to stable banking environments backed by stable financial institutions that guarantee smooth transactions. Consumers rely on this level of certainty. The still unregulated world of the metaverse naturally raises some trepidation. Until businesses can make their payment platforms in the metaverse as user-friendly and trustworthy as possible, widespread adoption is unlikely to happen anytime soon.
There’s growing opportunity in emerging markets
The virtual world can create new means to capture up-and-coming segments across industries and countries, helping to level the playing field in markets where financial inclusion is poor. Arguably one of the most valuable possibilities of the metaverse is that it will pave the way for consumers from emerging markets to access this marketplace.
Digital assets can be sold, traded and marketed through the metaverse marketplace, meaning an alternative way of accepting a payment for a product or service, promoting inclusivity for underbanked consumers. This will create new revenue streams and consumers that payment providers can tap into.
Latin America and APAC are experiencing unprecedented e-commerce growth as the number of unbanked consumers continues to decline, presenting possibilities for the opening of a much larger market in the metaverse. In some parts of Latin America and APAC, where access to cross-border goods and services is more difficult from a compliance and regulatory standpoint, the metaverse can further level the playing field, creating easier participation in the global economy.
Brazil, for instance, is seeing real-time 24/7 payments progress quickly, driven by PIX, the first instant payment system available to local consumers, thus reshaping the Brazilian payment landscape. Introduced by the central bank of Brazil, PIX is expected to grow in appeal for local and international businesses as the country’s central bank sees PIX’s growing future in the metaverse.
Consider partnering with other businesses
Businesses need to decide whether it’s worth the time, risk and investment to build their own robust platforms in the metaverse — or whether it’s a better idea to partner with others that already have a presence there. While it can be attractive for businesses to invest in a high-risk, high-reward opportunity, business leaders should ask themselves whether their products and services are really beneficial to the metaverse.
Ultimately, businesses should think about cooperation instead of competition. OpenSea, the largest NFT marketplace, for example, needs lots of services around the world. While building out a new network, OpenSea still needs traditional players to help move money around, get access to different payment methods, and comply with local regulations. Many worlds have to work together for the metaverse to function.
As we wait for the metaverse to evolve out of its exploratory phase, businesses should consider emerging opportunities that will create financial inclusion and accelerate growth. Rather than build potentially risky and expensive platforms in the metaverse, businesses should first consider how they can most effectively partner with other metaverse players.
Finally, widespread uptake of the metaverse will depend on consumer trust. Businesses that build bulletproof platforms and protect user privacy will have the most to gain in a still unknown and uncertain virtual world.
James Booth is VP head of partnerships at PPRO.
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