One of the most well-known trends recently in the world of innovation has to be the famous “Metaverse.” This fame began primarily on October 28, 2021, when Facebook, one of the world’s most important technology companies, announced it was changing its name to Meta, with its main mission being “connecting people.” Almost a year on from this announcement that undoubtedly put the concept center stage, most of the global corporate sector has in some way opined on it, or even launched concrete initiatives seeking to be part of the future Metaverse.
Companies such as Nike, Coca-Cola, Tommy Hilfiger, Wendy’s, Samsung, and many others, have done this either to position their brands or to promote new business models. Similarly, discussions about the opportunities and challenges of the Metaverse are increasingly relevant. Experts at the Bank of England recently warned that if an open and decentralized metaverse grows, risks from cryptoassets may have consequences for systemic financial stability.
Virtual Worlds, Metaverse, and the Meta-Economy
Let us start at the beginning. There is no conclusive definition of the Metaverse. However, several opinion leaders have helped provide a general framework that refers to an “immersive experience in virtual worlds.” However, although the terms are often used interchangeably, the Metaverse and virtual worlds are different concepts. While the Metaverse will be made up of numerous interconnected virtual worlds, no virtual world can be the Metaverse. This definition of the Metaverse clearly implies having ever increasing dimensions of our lives in “virtual worlds.”
And although we are still at a very early stage, evidently, we can find specific cases that are generating new business models and are helping to create what we might call a new “meta-economy.” This meta-economy has the potential to revolutionize all the industries in which human interaction is involved. Specific examples of immersive virtual worlds that are creating their own economies include Roblox, Fortnite, Axie Infinity, Warcraft, The Sandbox, and many others.
According to the Citi GPS, the disruptive potential of the Metaverse is estimated at between US$8 trillion and US$13 trillion (the world GDP is US$85 trillion). The potential impact would be so enormous that it would completely change industries such as entertainment, fashion, sports, retail, education, health, real estate, along with many others.
The Future of Payments in the Metaverse: Cryptocurrencies and NFTs
The main conclusion behind the Metaverse is that wherever there is human interaction (whether in the real world or the virtual world), there is the potential for commerce. So wherever commerce occurs or is possible, a means of exchanging value, and consequently a means of payment, is required. And of course, the most prominent payment method in this new meta-economy is undoubtedly cryptoassets.
The crypto revolution is paving the way for the Metaverse, and that means in Latin America too. As we said in our recent infographic, entitled Crypto Landscape in Latin America, with data collected in April 2022, 19% (two out of ten Latin Americans) already buy cryptocurrencies with a degree of regularity, and another 17% claim to have bought them at least once. All told, this means that one-third of respondents have bought cryptocurrencies at some point. But perhaps what is even more relevant is that our data found just 2% who claim not to have heard of them.
The interesting fact is that the cryptocurrency revolution began by revolutionizing the finance industry, but quickly evolved into “the finances of the Metaverse.” Bitcoin drove cryptocurrencies. Cryptocurrencies spearheaded the development of broader use cases based on blockchain technology and smart contracts. And ultimately, this evolution of crypto technology ushered in NFTs or non-fungible tokens. Whereas cryptocurrencies are something we are quite familiar with, NFTs are a tool that is key to the future of the meta-economy.
An NFT is a cryptographic asset embedded in a blockchain with unique identification codes and metadata that allow them to be distinguished from each other. NFTs are therefore a kind of digital asset with a unique feature: for the first time in history they genuinely bring the concept of “scarcity” to the digital economy. And as you can imagine, scarcity generates value, and value generates markets.
Any asset of the digital economy can be developed as an NFT and form part of a future meta-economy. NFTs become unique objects in virtual worlds, allowing new markets and means of exchange to develop, creating infinite business opportunities. For example, Nike announced in November that it would collaborate with the Roblox gaming platform to create a digital world where video game users can wear unique, one-off shoes in the form of NFTs.
Clearly, the opportunities are endless. But best of all, this revolution has just begun.
The Metaverse in Latin America
Although we are not yet seeing as many applications as those mentioned above in Latin America, the trend is growing by leaps and bounds in our region.
In fact, some sectors and areas are helping to awaken this meta-economy, such as the gaming and gambling markets. To give an idea of dimension, based on our research, at the end of 2021 these two segments already represented a market of US$16 billion. Moreover, our estimates put average annual growth at 28% through 2025, higher than the growth of e-commerce as a whole (25% YoY for e-commerce overall).
Interestingly, and as a sign of Latin America’s latent potential, one of the most popular virtual worlds is, in fact, Latin American: Decentraland. This makes a lot of sense because gaming and virtual worlds are the initial stages for creating communities. And again: where there is human interaction there is commerce, and when there is commerce there is a need to exchange value.
What consequences will the revolution of the Metaverse and the meta-economy have on payment methods globally and in Latin America? In future posts we will try to shed some light on this fairly complex question, while analyzing the main trends in Latin America’s crypto and digital-payments industry