NFTs and Financial Institutions: Planning an Implementation That Manages the Risks
- Date:May 10, 2022
- Tim Sloane
- Research Topic(s):
- PAID CONTENT
NFTs Will Drive Net New Spending Across a Wide Business and Consumer Demographic, but FIs Need to Mitigate Criminal Activity
New Mercator research delivers an in-depth look at what NFTs are and how various markets will impact your existing account holders. Mercator identifies the risks associated with most existing NFT platforms and suggests mechanisms the financial industry could implement to reduce those risks, both for themselves and for all those consumers who decide to participate in this market.
Given the high visibility of NFTs in the popular press, it is unlikely many of your customer’s haven’t already heard about them. It is also likely many of your customers will be very interested in how they can use them. After all, 33 to 40 percent of Americans are active collectors and collections can be monetized using NFTs. There are also 2 million artists and 179 million monthly gamers in the U.S., all of whom are potential NFT participants and are probably among your account holders.
“This research identifies how NFTs work, the markets that will be impacted first, and why criminal activity has yet to be thwarted, which makes participation by regulated entities risky. We also identify approaches regulated entities can take to reduce risk and identify fraud, and benefit the NFT participants,” commented Tim Sloane, Vice President of Payments Innovation and Director of the Emerging Technology Services Practice at Mercator Advisory Group. “If your financial institution doesn’t address the approaching NFT needs of your customers, they may simply move all their assets to someplace that does”.
This report is 25 pages long and has 3 exhibits.
Companies and other organizations mentioned in this report: Adidas, American Express, Artist-in-Residence Program, Binance, Bored Ape Yacht Club, Cent, Chainalysis, CipherTrace, Cloud Security Alliance, Coca-Cola, Coinbase, Crypto.com, Decentraland, Disney, DraftKings, Drife, Elliptic, Ethereum, Fanaply, FIS, Fiserv, Flyfish Club, Gucci, IBM, Jack Henry, JPMorgan Chase, KnownOrigin, Larva Labs, Mastercard, McDonald’s, Mintable, NBA Top Shot, New York Stock Exchange, Nifty Gateway, Nike, OpenSea, Oracle, Original Penguin, Polygon, Prada, Rarible, Ray-Ban, Solana, Sorare, StockX, Stripe, SuperRare, Taco Bell, The New York Times, The Sandbox, Under Armour, Visa, Zora.
One of the exhibits included in this document:
Highlights of this document include:
- History, in which these were first defined as blockchain applications
- An explanation of what an NFT is and how it functions
- An up-close look at several use cases, including copyrights, identity, marketing, artwork, and Web3
- A deep dive into smart contracts and how they function
- The implementation of NFT exchanges
- The minting process
- The tight link between NFTs and cryptocurrencies
- How NFTs are tracked, sold, and originators’ royalty paid
- The many categories of NFT markets
- The role of financial service providers
- A review of today’s largest marketplaces and how they differ
- How major brands are using NFTs
- The key factors driving visibility and use
- The problems associated with the legal definition of asset ownership versus the NFT solution
- The challenges associated with proving provenance
- Review of the documented problems for current marketplace cyber security and identity fraud
- Identify risks associated with smart contracts
- Suggestions for how financial institutions may manage the risks while participating in NFTs at different levels
Interested In This Report
How Alternative Identity Authentication Methods Will Change Payments
Digital wallets have long been a place to store payment cards, boarding passes, and tickets. More recently, tech providers like Apple have added mobile driver’s licenses on a limit...
Generative AI: It's Here, and It Defies Static Definition
Generative artificial intelligence is not just hype. It is a high-impact technology that requires the attention of leaders in every industry. Payments and financial services produc...
Fintech Investment in a Changing Market: 5 Things to Know for 2023
With investment capital tighter in 2023, there’s less interest in untested, unproven fintech startups and more of an emphasis on coming out of the chute with products that are read...