How Virtual and Augmented Reality Are Shaping the Future of Commerce

Contact Expert: Danny Russell

As adoption of digital technologies and payments continues to accelerate, virtual reality and augmented reality are emerging as new tools that are reshaping commerce. Which reality offers the best consumer experience for the future, and how do payments fit in?

Virtual reality versus augmented reality

While they sound similar, virtual reality and augmented reality are distinctly different from one another. Virtual reality (VR) replaces the user’s outside world with images that transport them somewhere else, like into the cockpit of a starfighter or to the bottom of the Marianas Trench.

A VR headset fills the user’s vision with whatever is being projected for a completely immersive experience. Most VR headsets are tethered to a computer or game system, limiting the user’s mobility. Basic VR viewers that work with a smartphone, like Google Cardboard®, allow more freedom of motion but are limited in their capability and display functions.

In contrast to VR, augmented reality (AR) adds to the user’s outside world by projecting images onto something that already exists in their surroundings, such as placing a La-Z-Boy® sofa set in their living room or a Rolex® watch on their wrist.

AR doesn’t require a headset or tethered hardware and instead uses a smartphone, tablet or AR glasses like the Microsoft HoloLens®. The device adds images on top of whatever its camera is aimed at. Users can move freely during the experience. For an easy example, think of how Pokémon Go® lets gamers capture Pokémon “in real life” by animating the Pokémon over the live image captured by their smartphone cameras. Unlike VR, AR is not a completely immersive experience because the user is always aware of what is happening in their actual surroundings.

Virtual Reality is drawing consumers into the Future

Led by gaming and used by NASA to train astronauts, VR enjoys a popular image that captures the imagination. In theory, VR could change a routine treadmill workout into an exciting trail run through the Alps. In reality, though, VR today lacks accessibility beyond niche industries because of inherent drawbacks that include clunky and expensive technology, users’ space limitations and, from a commerce standpoint, payments that break the immersive user experience.

“VR payments is a battle between immersion and control,” says Danny Russell, payment technology strategist and futurist at FIS. “When users are in that virtual world, they want to be immersed into it. But they also want to be fully aware if they’re going to be spending real money.”

"When users are in that virtual world, they want to be immersed into it. But they also want to be fully aware if they’re going to be spending real money."

Danny Russellpayment technology strategist and futurist at FIS

Over the past several years, Worldpay from FIS® has explored how payments could work within the VR experience. The company’s first prototype transferred the typical payment experience a consumer would have with a terminal into a video game scenario. A more recent prototype paired a user’s mobile device to their VR headset so they could use their voice to complete a purchase while remaining immersed in the VR experience.

“We’ve been looking at blending the immersion experience VR offers with a strong customer authentication process for payments within that experience,” says Russell. “The right payments experience is important because it gives the user that sense of control they want when spending their money.”

Improved technology, like more affordable and wireless VR headsets as well as a more integrated and seamless payments experience, will help expand VR use cases in the future, notes Russell.

Sporting events, gambling, entertainment and travel all hold potential for VR applications, he notes. Many organizations are already exploring their options.

Already, the NBA® is giving fans front-row seats to games from their living rooms using an Oculus® VR headset or through a smartphone paired with the TNT® VR app.

“VR will be useful for those experiences that put the consumer in a real-life situation somewhere else. One use case, which could become more common in the future, is to allow the consumer to preview the experience before they buy it,” explains Russell. “For example, comparing a wine tasting tour of Italy with a two-week Alaskan cruise virtually and then making a decision and paying for the actual trip while still immersed in that virtual world.”

Augmented reality is more accessible for today’s consumers

While VR is the darling of the future, AR has emerged as a more accessible and convenient experience from a consumer and payments standpoint, spurred in large part by the pandemic that stranded people in their homes for weeks and months at a time.

“2020 brought a lot more use cases for AR, with consumers flocking online to purchase everything from groceries to deck furniture,” said Russell. “AR also has an edge over VR in everyday life because it facilitates the types of experiences that work within a user’s real world.”

One of the most well-known examples of a retailer harnessing the power of AR is Ikea®. The Swedish company was among the first to enable customers to preview how products will look in their home using their smartphones. Other retailers, like Nike® and the eyewear retailer Warby Parker®, are using AR technology to allow their customers to try on their products virtually.

As with VR, a more integrated payments experience will streamline AR shopping, predicts Russell, enhancing retail and other experiences such as wayfinding/navigation and e-learning. Making payments an easily accessible piece of the experience will help drive usage.

“Retailers want to shorten the payment experience so there’s no delay between the customer’s decision to buy and when they make the actual payment,” notes Russell. “Offering customers the option to ‘pay now’ while in the AR experience will be key for retailers to capture the sale and drive loyalty.”

Room for both realities

Despite their differences, both VR and AR will have a place in the future of commerce, with each facilitating different types of consumer and commerce experiences.

By their very nature, Russell emphasizes, VR will be oriented to the immersive and experiential experiences, while AR will be best suited to retail and scenarios that supplement the user’s actual environment.

A streamlined and integrated payments experience will be a key consideration for both VR and AR applications to keep consumers engaged within each platform.

All third-party trademarks are the property of their respective owners and not affiliated with FIS.

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