What is the potential of NFT-based banking

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With glob­al bank­ing land­scape expect­ed to adopt a decen­tralised approach, investors seem to won­der how non-fun­gi­ble tokens (NFTs) can con­tribute. It is believed that NFT mar­ket­places can per­mit NFTs’ util­i­sa­tion to boost the rate of dig­i­tal pay­ments globally. 

Accord­ing to METAV.RS, a meta­verse man­age­ment plat­form, NFT-based week­ly sales capac­i­ty increased from 100 in 2017 to around 15,000–50,000 range in 2022. Report­ed­ly, NFT sales over­took $250 mil­lion on the Nifty Gate­way plat­form along with cre­ation of an around $41 bil­lion worth expen­di­ture in cryp­tocur­ren­cy, for 2021. “I believe the rise of NFTs and their asso­ci­at­ed mar­ket­places has dis­rupt­ed the tra­di­tion­al art and col­lectibles mar­ket. Banks might fore­see an oppor­tu­ni­ty for new rev­enue streams such as offer­ing finan­cial ser­vices to NFT mar­ket­places and their users by pro­vid­ing cus­to­di­al ser­vices to NFTs,” Vijay Pravin Mahara­jan, founder and CEO, bitsCrunch, a glob­al data ana­lyt­ics com­pa­ny, told FE Blockchain.

Mar­ket research has shown that NFTs’ util­i­sa­tion as col­lat­er­al can help process mort­gages faster and ensure funds can be trans­ferred from any­where. Insights from Insid­er Intel­li­gence, a mar­ket research firm, men­tioned that NFTs can help banks cope with prob­lems around han­dling sen­si­tive finan­cial data. Experts sug­gest that finan­cial tech­nolo­gies (fin­techs) can also avail ben­e­fits from NFT trad­ing, and con­duct dis­tri­b­u­tion of roy­al­ty payments. 

“In a dig­i­tal pay­ments world, NFTs can be used to ver­i­fy dig­i­tal iden­ti­ty. First­ly, the NFT demand can dri­ve tech­no­log­i­cal inno­va­tion and invest­ments in space. Sec­ond­ly, since NFTs are con­sid­ered nascent, reg­u­la­tions might help legit­imise their usage. NFT-based bank­ing has the poten­tial to rev­o­lu­tionise the con­cept of own­er­ship and lend­ing,” Edul Patel, founder and CEO, Mudrex, a cryp­to invest­ing plat­form, stated. 

Report­ed­ly, plat­forms such as The Sand­box, OpenSea, Immutable X, among oth­ers, have incul­cat­ed NFT-based bank­ing appli­ca­tions. For exam­ple, OpenSea per­mits users to make pay­ments using deb­it and cred­it cards and Apple Pay.

From a future per­spec­tive, NFT-based bank­ing can head for main­stream usage through adop­tion of a reg­u­la­to­ry frame­work. As stat­ed by Krungsri Research, a finan­cial group, banks should adopt prac­tices such as brand aware­ness, oper­a­tional effi­cien­cy, and intro­duc­tion of new prod­ucts to enter the main­stream NFT ecosys­tem, keep­ing in mind tech­no­log­i­cal advance­ments. “With the addi­tion of tokeni­sa­tion of phys­i­cal assets, banks aim to eye them with­in the con­text of meta­verse. How­ev­er, I think the mar­ket­ing and pro­mo­tions part of the banks is gear­ing up for util­i­sa­tion and dis­tri­b­u­tion of NFTs to poten­tial cus­tomers on meta­verse,” Pratik Gau­ri, founder and CEO, 5ire, a blockchain-based plat­form, concluded.

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