The Future of E-Commerce Payments in the Metaverse

The metaverse is being much talked about. Investments in this virtual world are growing. Mastercard recently announced it is testing new technology that is intended to operate in the metaverse and allows customers to make biometric payments using their face or hand. Capital One’s recent announcement that it will enter the metaverse with virtual credit cards and non-fungible tokens (NFTs) further supports this. Meta has changed the name of its Facebook Pay service to Meta Pay, most probably intending to dominate the metaverse’s payment system. Vendors of payment solutions are likely to enter the metaverse as well.

Is the metaverse an effective sales channel for retailers now? Experts doubt that as there are certain obstacles to this and one of them is payment processing.

Working with cryptocurrencies can be trickier for businesses than with conventional payments. With The value of cryptocurrencies like Bitcoin changes, they are unregulated, many customers do not prefer using these as a form of payment, they are not widely utilized or trusted by consumers.

Digital currencies belonging to the category of stable coins have less volatility compared to fiat currencies although this is also doubtful, but there is still no regulation.

Many countries are developing central bank digital currencies (CBDC) and they currently appear to have the most trust of these types of payments, the Federal Reserve has not yet decided on whether to pursue or implement a CDBC.

Another digital currency that can be considered for the metaverse is a closed loop payment. These are payments by “coins” or “tokens” that would only work in this specific environment like in clubs, vacation locations, in online games. This payment is simple but it contradicts the general idea of the metaverse because it is only valid in special shops, not in the whole sphere. Besides,to make gamers spend more, there is often a significant discount scale based on the amount someone buys. For example, spend $100 to get $1,000 worth in digital offerings. This won’t work in the case of real-world items being purchased in the metaverse because it is not feasible for merchants to offer these kinds of major discounts.

Traditional payment methods are a good option with biometrics used to authenticate them.

By 2025, about 1.4 billion people are expected to use facial recognition technology to authenticate a payment, more than twice as many individuals who did so in 2020, according to Juniper Research.

In a virtual environment it is far simpler for consumers to pay with their voice than to determine how to type long passwords. Consumers value speed and convenience, retailers want to facilitate secure payment transactions and reduce the risk of fraud. It is clear that biometrics should play a significant role in facilitating payments in the metaverse.

To complete payments easily and seamlessly, the payments platform should be able to recognize devices consumers are using in the virtual world, include payment methods with a straightforward user interface, such as Click-to-Pay, Apple Pay, and PayPal, consider payment options that let users authenticate with voice recognition, eye scans, or both, consider payment options and providers that support delegated authentication.

Retailers can take over the authentication process and inform the issuers that the authentication has been executed so they do not have to do it again. This can make it easier for merchants to handle the authentication somewhere else in the customer journey and not necessarily in the sensitive checkout process.