How the metaverse will reshape money, payments and identity
Money replaced the bartering system thousands of years ago, leading to a vast array of payment types. Now the real world where those transactions take place is being augmented by a metaverse which promises to radically reshape the world of payments again.
The concept sounds fantastic but it is already a part of our many younger generations’ lives through games such as Minecraft, Fortnite, or Roblox. Metaverses allow people to create ‘economic avatars’ who can not only explore virtual worlds, but make transactions with real world assets via tokens and other digital assets such as cryptocurrencies.
“You can see that this shift towards the virtual world is well underway, and the next generation of consumers are already there,” digital financial services expert David Birch said in a recent Australian Payments Plus (AP+) POV podcast.
“I was doing some work for an insurance company recently looking at, how are you going to sell insurance to people in five years’ time when they get their first car or go to university… If you look at the actual figures for attention, where those people are is actually already in the metaverse.”
Consumers will move to the metaverse
Another example is shoe company Vans, which created the interactive Vans World in Roblox in 2021 to bring skateboarding, fashion, and communities together. It has attracted 100 million visits and earlier this year used the site to launch its new Mixxa shoe before its real-world debut.
“Brands use the metaverse as a place to test concepts and desires, to see what people like, and then go on to create things in the real world – in some cases by just 3D printing.”
Birch (who, with Victoria Richardson, wrote the book Money in the Metaverse) acknowledges that the metaverse is still in its infancy. He compares it to the Apple Newton – an expensive PDA that never achieved widespread popularity in the 1990s, but helped pave the way for the ubiquitous Apple iPad.
“We’re in the early stages but if we want to understand where consumers are going to be within our strategic horizons, we need to understand that more immersive world and how to do business in it.”
Birch says he recently attended a book launch in a metaverse, but then had to leave to buy the book, which requires a convoluted process – scanning a QR code, which opened a website, and then entering credit card details.
This subverts a fundamental part of the metaverse – the ability to make transactions while inside it, which usually requires tokenisation – converting a holder’s rights in an asset into a digital token on a decentralised, digital ledger. It is a strategy that can drive a wide range of new business innovations and is attracting some powerful supporters.
Larry Fink, the CEO of the world’s largest asset manager BlackRock, is pushing the world’s largest asset manager to embrace tokenisation of financial assets such as stocks and bonds. It would allow customised strategies and instant settlement. Meanwhile, the Bank of International Settlements is also working on the next generation financial market infrastructure.
“It’s all built on tokenization,” Birch said. “And the reason is – and this is why we join the metaverse as well – it’s without clearing and settlement. It’s just cheaper. It’s not because of some ideological commitment.”
An inbuilt trust layer in the metaverse
Such payments are inextricably linked to digital identity. It has become a fraught area, with merchant losses from online payment fraud alone forecast to exceed $US362 billion globally between 2023 to 2028, according to Juniper Research.
Digital identity in the metaverse has some novel differences with proving identity in the real world. The metaverse – unlike the internet – has an inbuilt identity or trust layer with its payment infrastructure.
“In the metaverse, we can have a degree of security that we don’t have, and we can also have a degree of privacy that we don’t have in the physical world because your personal information is never part of those transactions,” he said.
“You have this idea of gated communities in cyberspace, where the walls are built by cryptography rather than out of bricks, and they’re actually much safer.”
A cryptographic proof allows a business to verify whether a customer is over 18 compared to the common real-world scenario where a business checks their date of birth on a driver’s license or passport. It allows the business to meet its regulatory requirement to only serve people over 18 while maintaining the privacy of customers.
“That sounds weird that you could do that, but actually, from a technology point of view, it’s quite trivial.”
AP+ has built ConnectID to help people verify their identify online by only sharing necessary personal information. It can make the process faster and safer, as well as providing cost savings to businesses.
“The bank knows that you’re an Australian, that you’re over 18, all these kind of things, so the bank can be the person who provides those credentials for other people to look at,” Birch said.
