By Adam Atlas
Attorney at Law
With Meta hiring 10,000 people to build the metaverse and VCs eager to invest in Web 3.0, decentralized and blockchain innovations, I've developed hypotheses on the future of payments technology licensing. The first article of this series covered building for licensure; the second covered commercialization. This article explores possible futures for this kind of technology.
From an intellectual property licensing perspective, crypto blockchains, such as Ethereum, are not an ideal framework because they are mostly transparent. For example, you might decide to develop a payment smart contract that can be deployed by a merchant to post a pay-in address, receive payment in ethereum, or split the ethereum for the merchant and its sales representative or supplier.
It takes only a base-level of blockchain contract writing knowledge to copy a smart contract. Ethereum and a number of other blockchains that host smart contracts are mostly transparent. That transparency is an asset—because it's hard to hide where value has been sent and what formula was applied to allocate value.
However, the transparency is an open door for copycats to recycle your hard work of developing the contract. Imagine a POS device that came with a complete set of blueprints not just for the device, but also for all of its electronics and software—that's a crypto smart contract.
In terms of building long-term value, crypto smart contracts are of limited utility because the barrier to entry for competitors is nominal.
Storing and managing private keys in crypto is notoriously difficult. Remember, storing cardholder data was a huge problem that was solved with contemporary technology and a flurry of competing services. There is now an opportunity to do the same in support of crypto. In simple terms, this means services to help businesses manage their crypto assets and integrate that with accounting. For example, a restaurant that accepts bitcoin should be able to reconcile those receipts with tax reporting and remittance as well as other bookkeeping functions.
It's time for a payments provider to develop a POS terminal for the metaverse—one that works in Roblox, Meta and other virtual worlds. This is not rocket science, and it can be done in a way that protects the developer's intellectual property, as well as in a way that makes the service licensable and profitable.
There is no need to be spooked by the metaverse; it's just new permutations of the internet with a more interesting interface. The promise of Web 3.0 is that consumers will engage with the internet, metaverse and other entertainment forums using digital assets that they own, control and commercialize. This activity is rife with opportunities for payments integration and automation—opportunity to write software that will be deployed to those realms the way virtual terminals, payment links and payment apps are deployed in the "real" world today.
Meta scrapped its stablecoin payment project and (for now) will fall back on traditional payment rails with which traditional payments providers and developers are entirely comfortable.
A number of states are now updating company law in their states to allow for companies to be created and administered entirely in digital form. This means you could have a company that really does exist, for the most part, entirely in the metaverse. A law office full of dusty company minute books is finally going to be a thing of the past.
A number of payments innovations such as crypto, prepaid digital cards and discounted international remittance make payments easier—but no amount of innovation is likely to do away with consumers' voracious appetite for credit.
People want to spend money they do not have. Similar to people forever needing food and water, the potentially endless desire for credit is something to perhaps bank on into the future of payments technology licensing. The methods of assessing creditworthiness may change, the creativity of credit products may increase, but they are here to stay. Therefore, the opportunity in payments application development is to satisfy the ever-lasting need for credit, but in the new worlds. Take, for example, the Axie Infinity game (https://axieinfinity.com), a game through which successful players are compensated. There is a cost, however, to start playing the game. Investors have started a business of lending money to people who need money to start playing the game. This is but one example of the ancient concept of credit applied to an entirely new business—playing an online game for profit.
An application to connect the dots between lenders (old and new) and borrowers in the new metaverse is a no-brainer application waiting to be developed.
Once upon a time, a payments provider simply had to secure cardholder data. Now that merchants in the metaverse will be operating in an entirely digital realm, the opportunities for impersonation, account compromise, scams, phishing and all manner of wrongdoing are multiplied. Applications that bring assurances as to security will likely be prized.
Death of the ISO has been declared many times over the past couple decades. While the barrier to entry for ISOs has risen due to the need for technological capacity, keep in mind that acquiring banks need someone to help their cards be accepted in the metaverse. Who better than ISOs? Acquiring banks are a necessary appendage to issuing banks, and issuing banks are eternally necessary suppliers of credit. If acquiring banks don't push ISOs into the metaverse, merchants will pull them in.
One lesson learned observing payments technology developers is that many of them are not developers themselves. You don't have to be a coder to be a developer. In fact, a lot of coders are not much use in designing ideal commercial applications for their talents. Coming out of an ISO business experience, you can hire coders and conquer the world.
In publishing The Green Sheet, neither the author nor the publisher is engaged in rendering legal, accounting or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. For further information on this article, please contact Adam Atlas, Attorney at Law via email at atlas@adamatlas.com or by phone at 514-842-0886.
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