The Metaverse industry has come a long way. There are now more than 600 million active users interacting on Metaverse, with user penetration expected to increase to 39.7% by 2030. What’s worth noting is that 51% of the current active users are under 13, implying that the industry will grow as users age.
The concept of Metaverse was first introduced in Neal Stephenson’s 1992 science fiction novel “Snow Crash”. In the novel, the Metaverse is depicted as a virtual reality (VR) based successor to the Internet where users interact with each other through avatars in digital worlds. Advancements in VR, augmented reality (AR), blockchain technology and artificial intelligence have turned what was once fiction into a reality.
The Bank for International Settlements (BIS) acknowledged that while some use cases of VR technology are gimmicky, it shows real potential for services in a domestic and cross-border manner, such as e-commerce and payments.
Statista projected the Metaverse industry to reach USD 74.4 billion in 2024 and USD 507.8 billion by 2030. The largest gains come from gaming and e-commerce, drawing USD 200 billion and USD 150 billion respectively. North America holds the largest share in the Metaverse market largely due to the presence of metaverse technology providers such as Meta Platforms Inc. and Roblox Corporation. Roblox is the most popular game on Metaverse with 70.2 million daily active users.
Payments in Metaverse
Currently, both traditional payments (centralised) and cryptocurrencies (decentralised) are accepted.
Based on a survey of 10,000 metaverse users conducted by PayPal, users do not rely solely on one payment method but pay in different ways. The survey reveals that more than 80% of respondents purchase metaverse tokens using PayPal, followed closely by debit cards. Other traditional payment methods used are credit cards, direct bank transfers and prepaid cards. The study also shows that the adoption of cryptocurrencies, non-fungible tokens (NFTs) and decentralised finance (DeFi) is higher among Metaverse users with 80% of Metaverse users currently using cryptocurrencies.
| Benefits | Challenges |
| Borderless transactions - there are no geographical boundaries | Integration gap - Need for interoperable systems to close the gap between different platforms and across virtual worlds |
| Financial inclusion - DeFi covers a larger audience, including the underserved and unbanked | Regulatory uncertainty - With the industry at an infancy stage and catering to a large audience, it is challenging for authorities to agree on a set of regulatory standards and policies on privacy, data and consumer protection, including for a DeFi system |
| Innovation - an entirely new platform for creators and service providers to come up with new experience-based products | High cost of maintaining security measures to prevent cybercrime such as fraud, unauthorised transactions, phishing and hacking |
Conclusion
As the Metaverse continues to evolve, it offers a wide range of opportunities to users and businesses. While the benefits are aplenty, especially to cross-border payments, challenges must be addressed to ensure a safe and conducive environment.
