5 minute read
Commerce in the metaverse
*Editor's note: This article was updated on March 8, 2023, from its original publish date of September 26, 2022.
The signs are everywhere: The metaverse is going mainstream. In its early days, users were mainly gamers and tech-forward early adopters. But now that brands like Adidas, Nike, Coca-Cola, Microsoft and Meta have joined the conversation, everyone is paying attention.
The metaverse is hard to define because it's still evolving. It blends digital and physical (“phygital") worlds to create a unique, immersive experience where users can interact with each other. Many users access this new world through augmented reality (AR) and virtual reality (VR) technologies. “The metaverse is emerging at a time when a more decentralised internet is also under construction, commonly referred to as Web3. The two are related, but whether the success of one will depend on the success of the other is a topic of debate,” says Frank Young, chief strategy officer at Global Payments.
What are centralised and decentralised metaverses?
Metaverses fall into one of two categories: centralised and decentralised. Centralised metaverses are built, governed and monetised by a single institution. Decentralised metaverses offer an open-source platform that users control.
In a centralised metaverse, one entity governs and controls the experience—often an institution or company that people know and trust. Individual users interact in a space overseen by leadership teams and monetised according to the governing entity's strategic vision. Massive multiplayer games like Roblox and Fortnite are great examples—the entities that run them build the user experience and develop community rules.
Decentralised metaverses are much earlier in development and implementation. They empower users to build and enhance immersive experiences through Web3 and blockchain technology. Decentraland and The Sandbox are great examples—they represent communities of users that create, iterate and manage without a central entity running the platform.
Where people go, businesses follow
Current projections for the metaverse represent an $8-13 trillion market opportunity by 2030 with as many as 5 billion users. It's no surprise that major brands are jumping in as fast as they can.
- Nike's “Nikeland” experience in Roblox offers participants promotions and visual showrooms. With a click of a button, participants can jump in and play games and style their avatars with Nike branding.
- Hyundai's “Mobility Adventure” combines a sense of fun with product marketing and education. Blocky avatars show off Hyundai vehicle technology, creating an immersive experience for the user.
- JPMorgan Chase & Co is the first major bank to enter the metaverse. Their Onyx Lounge in Decentraland enables the exchange of data and digital assets. The cafe's winding staircase and roaming digital tiger illustrate how companies can own virtual spaces that give audiences compelling brand interactions.
- Accenture has created its own VR training experience in the metaverse. “If that's where the people will be, that's where [brands] want to be," says Michael Abbott of Accenture. Users even visit The Accenture Virtual Experience Solution (AVEnueS) just to say “hi." Banks, retailers and media companies are early adopters, but interest goes far beyond those categories.
The metaverse allows businesses to experiment with new ways of connecting with audiences. By inventing and evolving their own virtual worlds, businesses have an opportunity to deliver more meaningful interactions with customers.
Consumer adoption is slow but steady
Today, gamers and metaverse NFT traders are most likely to enter the metaverse. But Insider Intelligence reports that 57% of adults surveyed agree that the metaverse will soon be as popular as social media. And 47% said they could see themselves using the metaverse.
Adoption is gaining momentum, but obstacles remain.
Insider Intelligence reports that 57 percent of adults agree that the metaverse will soon be as popular as social media.
- Cross-platform accessibility is limited. Digital assets need to be accessible across different platforms to expand commerce in the metaverse.
- AR and VR devices are heavy. The weight of headsets and glasses can interfere with the overall experience. When the market addresses this challenge, adoption is likely to expand.
- Privacy remains a concern. Policymakers need to address virtual identity and data privacy to ensure consumer protection and security in the metaverse.
“What are the rules of the road?” Abbott asks. “And who's going to set them?” Still, he and other advocates remain optimistic. As consumer adoption increases, businesses need a metaverse strategy that helps them stay ahead.
Commerce in a centralised vs. decentralised metaverse
In a centralised metaverse, commerce is limited to one platform. A famous example is the purchase of a digital version of a Gucci bag on the Roblox platform. It sold for 350,000 Robux, the equivalent of $4,115. The owner can't use, sell or trade it outside the platform. In other words, Robux have no value in other platforms or the real world. Unlike their centralised counterparts, purchases in decentralised metaverses can happen inside or outside the platform. For example, at Decentraland's Metaverse Fashion Week 2022, users purchased virtual fashion to clothe their avatars or could trade their digital purchases for real clothing.
These are just two examples of how commerce happens in the metaverse. But no matter how it unfolds, commerce in the metaverse will unite the virtual and physical worlds and open up a world of possibilities for businesses.
There's ample business opportunity
“It may be more useful, and certainly more exciting, to think of the metaverse not as virtual reality but as a new reality itself,” said Jim Kennedy, senior vice president for strategy at The Associated Press.
Businesses can leverage this emerging opportunity to build relationships with new customers and strengthen existing ones. Understanding what customers want in the metaverse can unlock new opportunities to engage with them like never before. Learn about their buying behaviors and payment preferences to build a strong metaverse strategy—with your customer at the center.
To learn more about commerce and payments in the metaverse and other insights and trends, download our 2023 Commerce and Payment Trends Report. And be sure to subscribe to our Payments in Focus newsletter to stay ahead of change.