Payments in the Metaverse

Gabriela: Kristy, can you introduce yourself and Women in Payments?

Kristy: I founded Women in Payments back in 2012, recognizing the need for women in the payments industry around the world to have career development opportunities. And we are now in six markets and helping to build a community of women in the payments industry.

Gabriela: There is a lot of buzz this day about payments in the metaverse, but it seems to be a little bit like teenage sex. Everyone is talking about it, but only a few people understand it, and even fewer are actually doing it. So, do you think this is a fair assessment?

Kristy: When you put it that way probably it is! There is a lot of buzz about it for sure. And the metaverse is growing as we get into concepts like augmented reality, virtual reality, and blockchain technology, which is really helping to set the stage for what we call Web 3.0. There are so many fantastic potential applications for the Metaverse. We're seeing all kinds of new players enter it. Some of the big banks, JP Morgan, HSBC, Bank of America, Deutsche Bank, and other players like Gucci and Adidas. Lots of buzz and lots going on. Nowadays we have little individual islands of the metaverse. There are many parallel metaverses emerging with competing gaming platforms and corporate-sponsored ecosystems. They are Decentralized Autonomous Organizations. And there are so many opportunities. It is like the internet 20 or 30 years ago when we had no idea what was going to be emerging and what the opportunities were, but we kept moving forward and it kept evolving.

Gabriela: If we think about metaverse as the next big thing, similar to the advent of the internet just a few decades ago, where do we see the opportunities here?

Kristy: We see just the tip of the iceberg, I'm certain. There are so many different ways that we can get into and experience the metaverse. We're already seeing it with virtual reality and gaming applications. Learning experiences such as virtual training for corporates, healthcare opportunities (if you think about online doctor visits or pharmacy consultations), virtual vacations, and remote onboarding. Most of these are based on existing and evolving augmented and virtual reality technologies. But the blockchain is also helping us to build out applications for the metaverse. If you think about the banking world, the metaverse is offering new ways to engage with customers. For example, creating high-touch personalized services for sophisticated products or personalized virtual annual portfolio reviews or financial planning sessions. The opportunities are endless. Another example would be BNP Paribas, which has launched a virtual reality app, that enables retail banking clients to access account activity and transaction records. Bank of America is offering employees virtual reality training in over 4,000 centres around the world. We are just starting to see these applications emerge, and it is so exciting to see more and more opportunities.

Gabriela: Well, I heard a lot of interesting things, but virtual vacations? These are not for me. I really like my real vacations. What about the payments in the metaverse how might they work?

Kristy: We are seeing a lot of the payment firms in the metaverse already starting to experiment and build products. Digital currencies, but also traditional methods are being adapted for the metaverse and digital wallets. For example, MasterCard is launching a biometric smile-to-pay payment method as part of its metaverse plan. JP Morgan has created Onyx in 2020 as the first bank-led blockchain platform, as a means to exchange value, information and digital assets. But what excites me is the whole concept of programmable money. We can create digital, small, smart wallets to do much of our financial transacting on our behalf without thinking about it. To quote David Burt in his recent article in Forbes Magazine, smart wallets can do the “financial donkey work” that's either too boring, such as paying for your car parking, or too baffling for most of us to deal with. Think of deciding whether or where to put your spare money in a tax efficient savings account or one that's based on equities. The two boring and two baffling options are places I'd be happy to have a digital smart wallet do my thinking for me. But this leads to an environment where the majority of transactions can be done between smart agents. You drive through the car wash and the car is doing the payment on your behalf and you don't even have to think about it.

Gabriela: Sounds interesting. Let's talk about risks. We have all watched the rise and recent variations of some cryptocurrencies. What type of risks might we see when transacting in metaverse?

Kristy: Well, risk is always something the bankers are concerned about. We should all be concerned about it because it can hit us in the pocket, as some of these online cryptocurrency trading platforms have not performed as we would like them to. There are risks for people who use these new payment platforms. In this virtual augmented reality and cryptocurrency world, there is no oversight and there are many risks. A key problem that we need to address is identity risk. We need the means to verify credentials to gain trust. Who are you dealing with? Is it some scammer posing as a trusted party at the other end of your transactions? These credentials and trust frameworks are now starting to evolve. We are also starting to see the regulators get involved because they have concerns about money laundering, ethics and other risks to consumers and participants in these transactions. We saw the monetary authority of Singapore a couple of weeks ago issue a couple of consultation papers. One of them focused on trying to provide some guidance and customer guidelines for cryptocurrency trading platforms. So, there is movement in this direction to start to help participants in financial transactions in the metaverse manage and understand the risks. We need education so that people understand what they are actually getting into. We have risks around data privacy also. There are ethical concerns and challenges around IP ownership, which will also need to be addressed. Lots of risks, but also lots of opportunity.

Gabriela: Kristy, I am curious about how we exchange value in the metaverse. What is the value of money in metaverse? And by that I mean, what is the interoperability of the different currencies in metaverse? How do you see that question being solved?

Kristy: I think money, as we know it, is really evolving. I don't even really talk about money anymore because it's more about exchanging value. As long as we are all on a common value exchange platform, then it makes it easy. But as we build out the metaverse, the concept of value is different in each of these islands of the metaverse. In one virtual reality, we might use stable coins, in another one, we might be using Bitcoin, and in another one, we might be using NFTs. They are all different ways to create an exchange value. And the challenge is interoperability. If I pay you in Bitcoin and you want to give me change, but you don't have Bitcoin, you have to give me US dollars or stable coins or NFTs. It's like apples and oranges. This is part of our challenge as we evolve the metaverse: how do we exchange that value, on an apples-to-apples basis? This is going to evolve in the different parallel metaverses which is why there is a race to the start line for so many of the payment organizations. PayPal and Mastercard and even the central banks with their central bank digital currencies want to make sure that they are available for people to use as opposed to other means of exchanging value. They all would like to be that default currency of choice. The challenge that we have is the interoperability. Can I bring my value that I have in my digital wallet if I go from one metaverse to another? Or do I have to exchange them somehow into a new digital wallet where that currency or that value will be accepted? That’s new. So, lots of opportunities, but lots of challenges that still need to be ironed out.

Gabriela: A lot of food for thought there. Maybe in a few years we will have another conversation on this topic, and we will have a point of view about our discussion today.

Kristy: I am sure I am looking forward to that. It's really exciting to watch this evolve. It is coming so quickly, there will be lots more to talk about in just a couple of years.