Integrating NFTs into Financial Services | PaymentsSource

Non-fungible tokens burst onto the scene last year as artists and celebrities used the tokens to sell unique – often original – digital artworks, touting that distributed ledger technology protects NFT artworks from counterfeiting and theft.

For several months, some NFT artworks were selling for millions of dollars, but after the recent cryptocurrency crash, NFT values ​​deflated sharply. The average price of NFT fell from $3,894 in May 2022 to less than $300 last month, according to data from Chainalysis.

But other potential use cases for these tokens are emerging. NFTs allow companies and banks to register, manage and transfer digital assets on a blockchain so that owners can store data or digital works on a blockchain where they are protected from cloning, loss or corruption. corruption.

From gaming and entertainment to real estate and insurance, NFTs – still in the early stages of development – ​​have the potential to streamline collaborative ownership through smart contracts and improve royalty distribution and management. and loyalty programs, experts say.

Original digital artwork drove the first wave of non-fungible token (NFT) development, but consumer loyalty, gaming, and other business processes are rapidly growing use cases.

Bloomberg News

Starbucks this week released details of a coffee-themed NFT program it will be activated later this year as part of its longstanding Starbucks Rewards program. The coffee giant aims to bring NFTs to the masses by expanding the metaverse to its 27 million loyalty program members – one in 10 American adults – by allowing users to purchase NFTs with a credit card instead of the cryptocurrency.

Members of the rewards program will be able to purchase or earn NFTs in the form of collectible digital stamps created with Polygon blockchain technology and redeem them for unique prizes and experiences, including a trip to the Starbucks Coffee Farm in Costa Rica .

Other brands offering NFTs include Budweiser, which last year offered a collectible NFT, and Gucci, which recently purchased virtual real estate in The Sandbox, a rival Decentraland metaverse where many NFT projects are located. based. Adidas and Nike have been doing good business in recent months selling virtual shoes via NFTs.

In addition to consumer loyalty programs and brand marketing, NFTs are increasingly driving innovations in secure event ticket distribution and online gaming account value management, according to John Stefanidis, CEO and co-founder of Sydney, Australia-based Balthazar, which aims to provide users with access to NFT games at no upfront cost.

“Our thesis is that when the usefulness and broader applications of NFTs improve, such as in the form of contracts, deeds and games, that is when we will start to see the volumes of NFT sales increase,” Stefanidis said.

While some of the NFT-based transaction linkages could occur without the involvement of banks, one expert believes that banks will eventually become necessary partners for businesses as NFT commerce expands.

“Banks are now at the center of payment networks, and what they can offer in the emerging world of NFTs and decentralized payment systems is trust,” said Alykhan Sunderji, co-founder of Sunder Legal. , based in Seattle, specializing in consulting for startups. the crypto and NFT arenas. Before launching the business last year, Sunderji served as legal counsel for Amazon’s fashion operations for eight years at the online retail giant.

In many industries, the hardest part of sending a payment is knowing who to pay. NFTs can solve this problem, Sunderji said.

“In the music industry, for example, it’s incredibly difficult to know who to send royalties to. But once you have an NFT to receive royalties, you can continue to send and receive profits safely. indefinitely, no matter where you go,” he said. said.

In another theoretical example provided by Sunderji, multiple people can use NFT ownership to jointly invest in a real estate project or other business, with NFT tokens being used to vote and make ownership decisions without intermediaries.

“While today someone might send me a check for a dividend, one day this company might send it to my digital wallet via an NFT,” Sunderji said.

Nick Casares, product manager at PolyientX, the NFT division of Phoenix-based Web3 concept incubator Polyient, also predicts that banks will play an increasing role in the emerging NFT market.

“NFTs are part of the set of emerging digital assets that are becoming a new way for people to think about value, and when it comes to controlling and transferring value, it’s inevitable that banks will play a role,” he said.

“Banks will bring trust to the emerging world of NFTs,” says Alykhan Sunderji, co-founder of Seattle-based Sunder Legal, which advises startups on crypto and NFTs.

In a blog post Last year, Citi Ventures noted that NFTs can be used to digitize almost any type of asset, and that the technology could potentially become a billion-dollar opportunity over the next decade.

But it could be a bumpy ride. The recent plunge in crypto stocks — down more than 60% from November 2021 — has dampened the momentum for tech innovation and investment. And recent crackups from prominent crypto players, including exchange Celsius and the fall of crypto-based hedge fund Three Arrows Capital, have further dampened the momentum.

In recent months, several banks and payment companies have launched a handful of NFT projects that are more experimental than transactional, in part due to the lack of formal regulation around NFTs.

Based in New York Quantum Bank in May, hit limited-edition hats and sunglasses on the blockchain to showcase its metaverse ambitions.

The venture capital arm of American Express recently joined an $8 million funding round for OneOf, a Miami-based company building a sustainable NFT marketplace that strives to grow NFTs for consumers crypto newbies.

To kick off its collaboration with OneOf, Amex launched its first set of NFTs last month at an event at the Mandarin Oriental Hotel in Bodrum, Turkey, where participating Amex guests could receive a free NFT collectible. designed by famous Turkish NFT artist Selay Karasu.

Amex’s goal with the event was to explore new ways to connect with card customers while exploring developments in NFT-powered commerce, Amex Ventures Director Margaret Lim said in a statement. Press.

Earlier this year Amex filed a trademark application with the US Patent Office for an online marketplace to buy and sell NFTs, a project that is still in development.

Mastercard in June supported a pride month event at Decentraland and separately announced a partnership with Coinbase’s NFT marketplace as well as several NFT trading companies and Web3 infrastructure company MoonPay.

Visa launched a year-long program in March offering financial and technical support to entrepreneurs working in art, music, fashion and film trying to integrate NFTs in their business model.

Banking tech firm Fiserv, which last year announced a partnership with crypto asset management firms Bakkt and an alliance with bitcoin tech firm Nydig, is refraining from taking specific actions involving NFTs.

Chad Davison, director of fintech solutions for Fiserv at the Atlanta-based company, said banks are intrigued by the possibilities NFTs and cryptocurrency hold for the future, but most financial institutions are still in research mode with the metaverse. “We watch NFTs on the radar,” he said.

Financial services providers could partner with other companies to create on-ramps to experiment with NFTs, said Billy Huang, founder of New York-based Insomnia Labs, which develops undisclosed NFT projects for consumer brands Under Armor and L’Oréal.

“As digital goods become linked to NFTs, you can anticipate that they will play broader roles, from inventory tracking to payment,” Huang said.


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