Metaverse Payments

Facebook is now Meta, and while the average person may find that about as significant as when Google became Alphabet, this name change is signaling something important about where the granddaddy of all social networks sees the future heading.

The idea is that the successor to our two-dimensional, point-and-click internet will be the metaverse, a vast communal virtual reality environment. The metaverse holds a lot of promise and potential in terms of creating immersive new digital experiences, but there’s one important question—once we get there, how are we going to pay for things?

For many years now, virtual reality has never quite managed to live up to its own hype, but the technology is finally starting to catch up to the concept.

Devices like the Oculus are starting to deliver the engaging VR experiences that have long been anticipated, and many companies are gearing up for the metaverse to go mainstream.

Meta aired a Super Bowl commercial that emphasized the metaverse’s potential to connect people with the friends and experiences they love even when separated by time and distance, and it’s only a matter of time before a killer metaverse app comes along and motivates people to check it out in large numbers.

Of course, once the metaverse takes off, people are going to want to start buying and selling things in it. We have no doubt that the platforms that allow users to access the metaverse will oblige, but you can’t take cash or plastic into a virtual environment. In the metaverse, digital payments won’t just be an option, they’ll be required.

What Is the Metaverse?

A metaverse, in a general sense, is a term for any virtual environment built to enable users to interact with each other socially. In that sense, metaverses have been around for a while already in games like Second Life, but the capital-M metaverse that’s been generating a lot of excitement lately refers to a concept of networked 3-D “worlds” that users can access with VR headsets and augmented reality devices.

Meta has taken a leadership role by purchasing Oculus and launching a VR platform called Meta Platforms, but other companies like Microsoft are developing their own VR projects as well.

Many consumers and tech visionaries are hoping for a metaverse like the internet, in which your virtual avatar can freely hop from one platform to the next without being restricted to walled-off proprietary spaces, but it remains to be seen how the metaverse will develop.

It’s a sure bet, however, that no matter what the metaverse looks like or which companies are hosting it, there will be commerce. People love to shop, and it doesn’t matter if the goods they’re buying are virtual—just ask the gamers buying outfits and dance moves for their Fortnite characters.

How Are Companies Preparing for the Metaverse?

Quite a few major companies have made moves intended to bolster their ability to compete in the metaverse if and when the speculation becomes reality. One common step is to file new trademarks to protect existing brands.

Trademarks typically apply only to the specific areas of business in which the company operates. That's why two companies in different industries can share the same name, like the company named Dove that sells soap and the one that sells chocolate. In the metaverse, many companies may want to start offering digital products, an area that wouldn't be covered by their existing trademarks. You can't start a shoe company called Nike, but until Nike filed new trademarks in late 2021, you may have been able to get away with using the name to sell virtual shoes.

Here are just a few of the brands that have already filed for new metaverse-related trademarks:

• Amazon
• Baskin-Robbins
• Brooks Brothers
• Burger King
• CVS
• Hyundai
• Red Bull
• Walmart

The number of metaverse-related trademarks filed has accelerated rapidly. There were more filings in Q1 2022 than in all of 2021. Some might see this as premature since we're likely still several years away from the metaverse being a major part of the economy. However, when the metaverse does arrive, it could have a huge impact. A report from Citigroup speculates that by 2030, the total market for the metaverse could reach $13 trillion.

How Will Consumers Make Payments in the Metaverse?

Making payments in the metaverse won’t necessarily involve anything new or different. There are plenty of digital payment technologies in existence right now that could easily be adapted for use in a virtual environment. The big questions are: 

• Which of those payment methods will the first major platforms adopt?
• How will payment technologies adapt to consumer behavior in the metaverse?
• What new forms of payment, designed with VR commerce in mind from the very beginning, will be developed?
• How will fraud and cybercrime find their way onto the metaverse?

One of the most obvious methods would be digital wallets like Apple Pay. The consumer could interact with a merchant or terminal in the VR space, prompting them to confirm their payment on their device in the real world for a quick and painless transaction. Third-party payment platforms like PayPal could be used in this way too.

Another option, already common in the aforementioned Fortnite and other games, is a form of digital currency or scrip that consumers would buy through whichever channels they prefer, giving them access to virtual “money” that they could spend in the metaverse.

This could be used to create more immersive experiences and give minors a safe way to buy things, but as a serious payment method, it has some limitations. It’s hard to get competing platforms to accept each other’s virtual currencies, which can make them inconvenient for consumers—especially if they plan on doing real shopping in the metaverse.

Blockchain and crypto technologies have also been floated as a solution for metaverse payments. The advantage with these is that they can be adaptable, open-source, and highly secure, but average consumers still haven’t embraced cryptocurrencies for everyday spending. One way to make this option more attractive would be to use a central bank digital currency or “stablecoin” that is designed to hold a consistent value, rather than investment currencies like Bitcoin that can be extremely volatile.

How Should Merchants Approach Metaverse Commerce?

It’s a safe bet that the retailers who get the timing right and establish beachheads in the metaverse right when consumers start to embrace it wholeheartedly will be seizing a golden opportunity, but there will be some risks, especially in the early days.

Fraud always follows where the money goes and seeks out loopholes, vulnerabilities, and new ways to scam people. Every sea change in the world of e-commerce brings new forms of fraud, and the metaverse should be no different.

This isn’t a reason to avoid becoming a metaverse merchant, but it is important to keep in mind that the threats may be new and unfamiliar, unprecedented dispute scenarios may come up, and your security efforts will need just as much attention as you transition into this new selling space as your marketing and sales techniques.

Conclusion

Will chargebacks follow merchants into the metaverse? If credit card transactions are the underlying funding mechanism behind their virtual payment methods, they might. In the future, card network mandates might include chargeback reason codes that address virtual disputes, but that’s all speculative at this point.

Whatever the future holds, merchants and payments institutions will have to adapt, learn the new technologies, meet consumers where they are, and fight off opportunistic fraudsters—same as always. As payments industry leaders, we are committed to staying ahead of burgeoning technology trends, supporting merchants around the world, and pioneering new fraud reduction strategies and techniques.

Thanks for following the Chargeback Gurus blog. Feel free to submit topic suggestions, questions, or requests for advice to: win@chargebackgurus.com