​Millennials and Gen Zers have an addictive new way to buy stuff that would look familiar to their great-grandparents. “Buy now, pay later” is a type of consumer credit that really got going in the 19th century when Singer sewing machines were sold for a “dollar down, a dollar a week.” But the modern fintech twist in “BNPL” is that it’s aimed at people making impulse purchases of fashion or jewellery or electronics rather than sofas or refrigerators. It’s delivered through apps that are wildly popular, leading to dizzying valuations of startups like Amazon, Zomato etc.

BNPL is the way? 

​Buy Now, Pay Later (BNPL) is a type of short-term financing that allows consumers to make purchases and pay for them at a future date, often interest-free. Also referred to as "point of sale instalment loans," BNPL arrangements are becoming an increasingly popular payment option, especially when shopping online.

Defining BNPL

​‘The India Buy Now, Pay Later Report 2021’ by ZestMoney gives an overview of the Indian BNPL ecosystem, global best practices, and the way forward for the industry in India, along with revealing consumer preferences and how Indian states took to BNPL.​The report shares insights such as while most of the customers (median) were in the 23-26 years group, BNPL emerged as the preferred option for people across age groups with the youngest customer being 18 years old and the oldest at 66. The number of millennial and GenZ customer base increased by 2X and 3X respectively.

India Buy Now, Pay Later Report, 2021

​If you have been using Amazon pay later, Flipkart pay later services, then please read ahead.​If you borrow from AmazonPay later account, they divide it between two lenders: CaptialFloat and Karur Vyasa bank. Now two loan accounts will show on your credit report which has reduced my credit score.​What most people don't realize is BNPL are like unsecured loans. Most confuse these for Credit Cards. Both have separate use cases. One spoils your credit history, the other builds it if used wisely.

​How BNPL is messing your CIBIL Score

Millennials and Gen Zers have an addictive new way to buy stuff that would look familiar to their great-grandparents. “Buy now, pay later” is a type of consumer credit that really got going in the 19th century when Singer sewing machines...

Using BNPL Services? Your credit score is being affected.  - Advisoira

the Metaverse has been positioned as both a successor state to the mobile internet, as well as a platform for human leisure, labour, and existence at large. The success of this vision depends on whether the Metaverse has a thriving economy. That includes competition and a constant cycle of disruption/displacement, a large number of profitable enterprises (especially small-to-medium businesses), capital mobility and strong consumer spending.

The Tenets Of Metaverse

The most common of the existing payment rails in the US are ACH (“Automated Clearing House”), Fedwire, CHIPs (“Clearing House Interbank Payment System”), Credit Cards, PayPal, and peer-to-peer payment services like Venmo. These rails have different requirements, merits, and demerits.

The Existing Payment Rails

Wires can only be used between (and thus through) banks, are only available during non-holiday weekdays and during business hours, transactions are not reversible, cannot be used to request funds (so it doesn’t work for credit card payments, invoices, etc.), and have high sending fees (e.g. Chase pays <$0.15 per wire, but charges $25–45 per outgoing wire), receiving fees ($15 to receive), and additional fees for non-USD wire, failed wires, confirmations, etc.

Limitations Of Wire Transfer

Credit cards are another key payment rail. They involve swiping a physical card (or entering credit card information), after which a credit card machine or remote server captures account information and digitally sends it to the merchant’s bank, which then submits it to the customer’s credit card provider, which either grants or denies the transaction. This process takes one to three days and typically costs merchants 1.5–3.5% of the transaction.

Existing Payment Rails: Credit Cards

Digital payment networks include PayPal, Square, and the Cash App. Individual accounts are primarily funded via ACH or credit card, at which point the platforms then serve as a centralized/single bank used by all accounts. As a result, all transfers between users of the same payment platform are effectively just reassignments of money held by the platform itself.Payments are instantaneous and when money is sent between friends and family, these platforms typically charge no fees. But when a business is paid, 1.5–3% transaction fees to the business are common.

Digital Payment Platforms

In the virtual world, the economy primarily involves goods that only exist virtually, which are bought via purely digital transactions. This economy is also large. Roughly $54B was spent on virtual goods, skins, and lives last year, compared to $42B at the movie box office and $30B on recorded music in 2019. It also poses no systemic financial risk, does not play a critical role in society, and has thousands of market participants and a dozen competing platforms. This should lead to creativity, innovation, and competition in payments.

The Fight to Control Payments in the Metaverse

In truth, the “rails” of the “virtual economy” today are much worse than those of the “real world.” They’re more expensive, cumbersome, and slow to change.As an analogy, the current technology is based on precedents that are closer to the founding of CHIPs in the 1970s than either PayPal or the iPhone.

The State Of The Virtual Payment Rail State

PlayStation and Xbox users need PlayStation Network and Xbox Live IDs to access online games and must usually pay additional monthly fees to access these games, too. Player entitlements (trophies and game purchases) are also forever locked to these platforms. If you buy Call of Duty: Modern Warfare on PlayStation, you can only ever access it, and many of the achievements from beating it, via PlayStation.

Gaming Consoles Turning Into Subscription Platforms

A household can just as easily buy an Android as an iPhone, or a PlayStation not an Xbox. But in the digital/virtual era, market power comes primarily from network effects and scale. And each of these platforms works hard to lock developers and users to their platforms by forcibly bundling separate businesses, such as hardware, drivers/APIs access, software distribution, payment solutions, services, identities, and entitlements.

The Network Effect

Apple uses its control over the App Store to prevent iOS browsers (whether made by Apple, such as Safari, or others, like Google Chrome) from using most of WebGL, a JavaScript API that allows for complex browser-based 2D and 3D rendering. Apple claims this restriction is for device performance, as native apps typically outperform browser-based experiences that must speak to native drivers through “translators.” However, this policy conveniently prevents developers from making rich games without Apple’s tools which elude its store fees.

No Rich 3D Effects In iOS Browsers

Apple prohibits applications from using its NFC chips for payments, thereby ensuring Apple Pay is the only digital payment solution that can use tap and go. Apple claims this is for security, but third-party developers, such as Marriott and Ford, are able to access the Apple NFC API so users can open doors. This seems like a far more dangerous use case than a $5 coffee.

NFC Double Standard

The very premise of the Metaverse presumes that the “next” platform shifts from hardware-based operating systems and hardware-centric experiences to persistent and ubiquitous virtual simulations. We already see this today. The most popular games in the world, such as Fortnite, Roblox, and Minecraft, are designed to run on all endpoints, and none requires nor succeeds because of specific hardware (nor are they optimized for any specific devices, either).

Changing Rules Using The Metaverse

If the value in the Metaverse will be primarily driven through virtual worlds and virtual creations, rather than better phones, then we want the most profits going to developers of the virtual platforms and the developers on them. However, you can’t access the Metaverse except through hardware, and every hardware player is fighting to be the (or at least a) payment gateway to the Metaverse. This is why Facebook, which lacks a major operating system, is investing so heavily in Oculus. And why Snap is developing its own AR hardware, <a href="https://www.cnbc.com/2021/05/21/snap-ceo-evan-spiegel-were-happy-to-pay-apple-30percent.html?__source=sharebar%7Ctwitter&par=sharebar">while defending Apple’s 30% take</a>.

The New Age Game

Apple does not deserve 30% of a transaction for virtual real estate or virtual avatars that are created by developers that don’t use any of Apple’s standards, built on a virtual platform that runs on nearly every device in the world, and not integrated into any of Apple’s products — all because the end-user has an iPhone (which they might have bought for Apple Photos, iMessage, or superior hardware). Nor should Apple take 30% of a sale price in the event those assets are traded. Or 30% of virtually provided labor or kickstarter-like loans.

The Undeserved Cut

All of the major NFT platforms and blockchain-based worlds are browser-based and lack console releases and mobile applications. These console and mobile platforms control their browsers and, as mentioned earlier, do not support common (and open) standards for complex rendering, rich user input, and more. As a result, developers are forced to choose between impractical fees or mediocre experiences.

The Web Browser Rocks

In the West, these systems would normally be at the mercy of the hardware gatekeepers. However, Tencent grew so powerful so rapidly in China that it even holds leverage over Apple, who allows it to process payment for its Mini Programs without taking a cut. Notably, Facebook asked for the same permissions in the West but was denied — even if it limits payments only to small tips for on-platform creators and waives its own cut.

Yes To WeChat, No To Facebook

Beyond various platform fees, the Metaverse economy is adversely affected by the policy decisions of various virtual platforms and publishers. These policies make it harder for users to spend money, maroons user spending, penalizes users for spending diversity and or using multiple platforms, and limits the utility of all purchases and constrains total investment.

The Challenges of the Proto-Metaverse Economy

Consumer spending today is constrained by the knowledge that no games last forever. Think, as an example, of anything you might buy on holiday but can’t bring home in your suitcase — a Boogie Board, a water bottle, a costume for Día de los Muertos. Expected obsolescence always constrains spending.

 Expected Obsolescence

Open economies, trading, and increases to commercial item value inevitably trend towards play-to-earn mechanics or behaviors, which can quickly devolve into “work” that ruins a game’s sense of fun and fairness. And the larger the Metaverse economy and more firm the ownership rights, the harder it is for a developer to correct this. There is a reason why, today, almost all of the major NFT/blockchain-based “games” are actually centered on collecting or speculation, rather than more traditionally-defined gameplay.

The New Game Economics

Over time, developers will figure out how to support “Metaverse” business models. And they’ll use the Metaverse’s comparatively larger economy to quickly surpass more “legacy” game makers. Free-to-play gaming, after all, was once considered a radical business model that at best would lead to lower revenues for a given game and at worst cannibalize the industry. Instead, it proved to be the best way to monetize and a core driver behind video gaming’s cultural ascendance.

Transversing Towards The Metaverse Business Model

Some economic solutions will likely emerge to facilitate the transition to an open Metaverse economy, too. For example, developers might bake degradation into an asset’s code — this skin works for 100 hours of use, or 500 games, or three years total, during which it slowly wears. Alternatively, users might have to pay an additional fee to bring an item from one publisher’s title to a competing publisher’s (just as many goods have import duties in the ‘real world’). Or pay more in the first place for an “interoperable edition.”

New Solutions For Upcoming Problems

A decentralized database isn’t needed to prove or manage asset ownership (if the NBA or Disney or Valve said who owned an image file or virtual currency, everyone would believe them). Nor is it needed to safely and quickly transfer money (Alipay and PayPal move billions per day via purely digital networks). What matters is not whether the blockchain is technically superior in a given way, especially compared to its current, point-in-time alternatives. Rather, it’s whether blockchain standards can more effectively enhance developer profits over time, and in turn, grow the Metaverse economy.

The Potential of Blockchain and the Metaverse

The decentralized, permissionless, trustless, automatically compensating blockchain model has several benefits. Most important is the fact that developers and users can invest their time and capital with confidence that a blockchain’s policies, incentives, or economics won’t change arbitrarily over time, or in pursuit of rent-seeking.

An Ideal Blockchain Network

If the ethos of Web 2.0 was “don’t be evil,” a blockchain-based web 3.0 is “can’t be evil."

Blockchain’s permissionless, trustless and financial systems also enable their networks to be widely decentralized in operations and adoption. The former minimizes control, increases performance time and liquidity, while decreases gas fees, while the latter increases network effects and utility. Programmable tokens, meanwhile, enable developers to easily issue governance rights to their users and reward contributions.

The Future Is Decentralized

Cryptocurrencies like Bitcoin and Ether, can be bought, sold, and traded globally and across almost all wallets (whereas PayPal cannot send money to a Venmo user directly) and in seconds to minutes, with no intermediary taking temporary custody. Users do not need a bank account, nor is it necessary to join a mega-platform such as Square, Microsoft, or Sea Limited. Sellers and businesses don’t need to negotiate, register, or sign long-term agreements with crypto rails, either.

Crypto Economy Shows The  Way

Regardless of whether cryptocurrencies become a common form of payment in the “real world”, they’re increasingly being used in gaming via NFTs and blockchain-based studios - and for initial user payments, in-game currencies, and UGC payments. As a result, the “crypto Metaverse” suffers from substantially less currency fragmentation than today’s gaming ecosystem (i.e. Minecoin, V-Bucks, COD Points, Robux, etc.), supports two-way exchanges.

Virtual Assets

The NFT(Non-Fungible Tokens) market has shown obvious signs of excess speculation over the past year. But it’s also clear that the hard-coded promises of NFTs — irrevocable ownership, open economies, and the ability to endlessly repurpose virtual assets — has led to substantial consumer spending. Open standards typically struggle to generate greater developer revenues, especially in the media business. Not so in crypto.

NFTs: The Promise Being Delivered

Today, only a tiny fraction of online users and gamers even have a crypto wallet, and almost no brands and games issue NFTs. But irrespective of multi-month dips in the blockchain/crypto/NFT economy, we see more of these groups embrace blockchain-based experiences each month. This produces a virtual cycle that drives more users to register a wallet, mint an NFT, or integrate crypto assets, which also increases the value and utility of all other blockchain products, thereby bringing more to the technology.

The Game Has Just Begun

Blockchain standards also look like the best way to engage today’s major games, gaming platforms, and brands into the emerging Metaverse, too. While companies like Activision Blizzard and Take-Two may recognize the potential of open economies and platforms, they’re unlikely to sign onto any system managed by a competing platform, such as those of Valve and Epic, as they pose too much strategic and financial risk.

The Winner Takes It All

Developers are held back by the worry that, in an open item economy, they might create far more value than they themselves capture. For example, Developer A might produce Skin A for Game A, only for Game A to decline, and Skin A become a popular (and valuable) item in Developer B’s longer running title. In this case, Developer A has actually created content for a competitor that beat them! Or maybe it just turns out that Developer A’s creations have become iconic and highly valuable, thereby netting players orders of magnitude more profit than the developer.

An Open Item Economy

The most disruptive aspect of digitally-native “programmable” payment rails, however, is how it enables greater independent collaboration and funding.Using smart contracts, a new, multi-member entity can be created within minutes. No signing documents are required, nor credit checks, lawyers, government filings, or even direct knowledge of the members. Smart contracts also automatically manage all payment flows, governance rights, information rights, and ‘bylaws.’

Virtual Collaboration and Funding

The role of payments, payment rails, and blockchains in the Metaverse. Part 
VII of ‘THE METAVERSE PRIMER’

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Using BNPL Services? Your credit score is being affected. - Advisoira

Payments, Payment Rails, and Blockchains, and the Metaverse — MatthewBall.vc

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