Finance and payment in the Metaverse

Facebook changed its name to Meta to make the concept of meta universe popular again.

The famous science fiction writer Liu Cixin once said that there are two roads in front of human beings, one outwards leading to the stars and the sea; the other inward leading to virtual reality.

Stars and the sea are not beyond the reach of ordinary enterprises, and virtual reality is approaching our lives, and it may usher in a new industrial carnival. So how should payment be changed for the upcoming virtual time and space?

Payment in the meta universe

A popular explanation is that “meta universe” is a collection of virtual time and space, composed of a series of augmented reality (AR), virtual reality (VR) and the Internet (Internet). Generally speaking, the “meta universe” is a virtual world parallel to the real world and highly interoperable, including AR/VR, cloud computing, AI, 5G, blockchain and other technologies.

Research institutions once concluded that Metaverse has six characteristics: continuity, real-time, compatibility, economic attributes, connectivity, and creativity. At present, the operability of realizing it is relatively low, especially in terms of economic properties, connectivity, and creativity.

From the perspective of the game, the movie “Top Player” shows the game meta-universe realized through VR technology. And through the linkage with the real world scenes and equipment, there is a broader space for virtual reality imagination.

What role does payment play in the meta universe?

In the “Nine Chapters Arithmetic” of the American venture capitalist and senior research expert of the Metaverse Matthew Bauer, payment is defined as “support for digital payment processes, platforms and operations, including legal currency and digital currency. Exchange (fiat on-ramps), as well as currency trading financial services such as Bitcoin and Ethereum , and other blockchain technologies.”

Simply put, the payment of Metaverse will include the existence of legal currency and digital currency. Based on China’s current regulatory policies for digital currencies such as Bitcoin, the contradiction between centralized currency and decentralized currency will continue in Metaverse. 

To understand from the most basic logic of payment, payment includes the identification of people and businesses, the determination of goods or services, and the consensus on transaction information.

Recognition of people and businesses. In the real world, payment uses cards and mobile phones as carriers, and the identification methods include passwords, biometric information, etc. On a secure carrier, users store their unique identification codes. In Meta Universe, we need to consider what is a secure carrier. With the current security path, adding SE security chips to any Meta Universe device becomes a carrier that can carry payments, such as VR glasses with SE security chips. On the other hand, the unique identification code of users and merchants has a wide range of imagination in the meta universe, such as the recent fire NFT technology.

The determination of goods or services. Commodities and services in the meta-universe become virtual, just like in games. If a commodity can change information through simple copy, paste, and delete, and the value of a commodity changes greatly in a short time, then the transaction itself has huge problems. With the help of blockchain And NFT technology can better solve this problem.

Consensus on transaction information. It needs to be similar to the role or mechanism of the current e-commerce platform, so that both parties can be sufficiently at ease about the content of the transaction, which is also what the consensus mechanism of blockchain technology can accomplish. 

From the perspective of traditional online payment thinking, the account holder will win the world, and the probability is still applicable to the meta universe. If there is identity recognition, it will have the living space of the account mechanism.

Preparations for payment giants

Before the meta-universe fire, the giants were constantly exploring the payment methods needed by the meta-universe.

In June 2019, Facebook, which has not yet changed its name, launched the cryptocurrency project Libra . Libra aims to become a new decentralized blockchain, low volatility cryptocurrency and a smart contract platform, aiming to create a new opportunity for responsible financial service innovation. Libra anchors a “basket of currencies” composed of multinational legal currencies, also known as “stable currencies”.

However, due to multi-country compliance doubts, member institutions continued to withdraw, Libra was renamed Diem , and aimed at the US dollar stable currency. In addition, Facebook is also actively promoting the digital currency wallet project, and recently its Novi has also launched a small-scale pilot.

After being renamed Meta, with the help of its layout of cryptocurrency projects, it can firmly control the payment channels and lay a solid foundation for the development of its meta-universe strategy. 

Due to policy restrictions, domestic companies have not made plans for cryptocurrency projects in advance, but there have been some attempts to support VR scenes.

In 2016, Alipay launched VR Pay. The user selects the product in the mobile VR platform or VR App to place an order, confirm the purchase, enter the payment link, select Alipay, and the user clicks to confirm the payment.

Finance and payment in the Metaverse

In essence, Alipay’s VR Pay is still an extension of the scenario based on Alipay’s account system, and it is still an online payment, which is a category of e-commerce payment.

In addition, some banks are also applying VR technology to improve user experience.

According to mobile payment network, in 2016, the construction of the “Golden Bee” maker space of the Guangdong Branch of China Construction Bank was completed. The virtual reality experience was jointly created by the Guangdong Branch of China Construction Bank and through a 6-and-a-half-minute VR experience film. Introduced the future application of VR technology in customer service, financial transactions, scene display, etc. At the 2016 China International Finance Exhibition, several banks, including Industrial and Commercial Bank of China, Bank of China, and Hua Xia Bank, provided VR devices to bring customers a brand-new financial service experience. At the 6th China (Guangzhou) International Financial Exchange Expo, Guangzhou Rural Commercial Bank set up a VR business hall, where customers can browse information and self-service shopping in the VR business hall.

Finance and payment in the Metaverse

However, at that time, the banks’ knowledge of VR was still relatively small, and more used VR technology to present information, and it did not achieve the interoperability of the current meta-universe. In the future, it will become a hot topic for financial institutions to explore how to find scenarios and provide services in Metaverse.

Those unsolved and unsolved problems

Payments in the meta universe in the future may be more complicated. Take the current game division as an example. The price of the same game on different console platforms is different, and the division situation is also different. Platform sharing mechanism, copyright, suppliers, etc. all have different accounting requirements.

If meta-universe has cross-border transactions and settled in accordance with the traditional legal currency, there will be exchange rate problems. In order to improve the efficiency of cross-border payment, SWIFT has successively launched projects such as GPI and SWIFT Go. In addition, the Group of Twenty (G20) has also reached a consensus and launched the “G20 Roadmap on Strengthening Cross-border Payments”, from 5 and 19 improvement suggestions to comprehensively improve the efficiency of global cross-border payment, which is also expected to benefit the development of Metaverse.

In addition, there is a relatively invisible issue that Chinese regulators are currently paying attention to, and that is ethics. 

Fan Yifei, deputy governor of the People’s Bank of China, stated at the 10th China Payment and Clearing Forum in September:

Strengthen the construction of financial technology ethics. Persist in the unification of innovation and risk prevention, the combination of institutional norms and self-discipline, and a sound ethical governance system featuring multi-party participation and collaborative governance. Financial institutions should fulfill the main responsibility of ethical management of science and technology, establish ethical review, information disclosure and other normalized working mechanisms; industry organizations should study and formulate self-discipline conventions and action guidelines, look forward to judging ethical challenges, promptly warn ethical risks, and build self-discipline defense lines; practitioners We must take the initiative to learn, raise awareness, consciously practice scientific and technological ethics, and resolutely resist bad behavior.

Although this is not clearly related to the meta-universe, with the popularity of the meta-universe, the financial and payment needs in the virtual environment will gradually spread. The meta-universe is parallel to the real world, but it is interconnected with the real world, and there are many possibilities. The problem.

Give a slightly indecent example. For example, if a woman uses a smart sex device, a hacker attacks the device, obtains the permission to use the sex device, and gives instructions to cause substantial harm to the woman. Will this be suspected of rape? Another example is that a user obtains device permissions remotely by paying a fee with the consent of a woman, and gives instructions whether he is suspected of prostitution. 

In addition, Metaverse may also have contradictions between virtual currency and the real financial system.

The currency in the game can buy a variety of virtual items in the game world, and once the influence of a game is large enough, its game props and game currency will be anchored in value with the real legal currency, such as a rare equipment or skin worth thousands Renminbi, the virtual currency in the game and the real legal currency have a certain exchange ratio. 

The same is true for the meta universe. If a virtual world has enough influence and takes up enough user time, its virtual items have a certain value. The most direct analogy is that in the future, Q coins can buy buns and game coins can refuel. Of course, there is a problem of financial supervision. But if it is a decentralized virtual currency, virtual props, and supervision is difficult to control, this will greatly impact the current financial system. 

In addition, how the digital renminbi in Meta Universe should perform its legal currency function will be a new direction for exploration.

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