Visa has jumped onboard the NFT train, paying $150,000 in ethereum for a CryptoPunk 7610 NFT — a female Punk with a mohawk, lipstick, and green-rimmed clown eyes. While the purchase is not a significant investment for the company, what could it mean for Visa and the NFT market?
The NFT that Visa bought is one of 10,000 unique avatars from the CryptoPunk collection, made by Larva Labs back in June 2017 and stored on the Ethereum blockchain. Upon release, the avatars were available for free for interested collectors.
In a recent report, Visa described NFTs as a promising medium for fan engagement. This view was developed in the pandemic year, when entertainment and sports industries suffered measurable losses of income — an estimated $18 billion was lost in global sports revenue. This loss in revenue meant that the industry needed to develop new revenue streams. The NBA, in partnership with Vancouver-based blockchain company Dapper Labs, launched a blockchain based trading card system, called Top Shot. Fans can purchase highlight clips and digital artwork from their favorite teams and players, with packs priced as low as $9, which are often sold out. A Lebron James highlight, part of the NBA’s Top Shot collection, was sold for $387,600 earlier this year.
By March 2021, nearly six months after release, NBA Top Shot had done nearly $500 million in sales with more than 800,000 accounts. This makes the soil fertile for a payment processor. With transactions ramping, Visa spots an opportunity. “Any digital transaction needs someone to enable it,” said Eric Christensen, the Chief Payment Officer at Digital River.
Visa’s strategy is to participate in transactions, from cross-border to e-commerce to push payments. For the payments company, NFTs represent a new commerce category. “The ability to track and leverage a digital asset in multiple environments could mean exciting new opportunities in ticketing, gaming, music, art and beyond,” said Cuy Sheffield, the head of crypto at Visa, noting that the market is gaining momentum.
However, the NFT market is still in its infancy and extremely volatile, which has made it subject to heavy public skepticism. Often dismissed as a fad, valid questions about NFTs’ long term value and legitimacy are raised. But it is NFT’s authentication of digital assets that has piqued Visa’s interest and may mean the trend has legs. “We believe that the ability to own and prove the authenticity and provenance of unique digital goods will have a lasting impact on retail and commerce, and strengthen their engagement with their customers,” said Sheffield.
There is optimism about the potential of converting assets into digital tokens, transforming industries like real estate and auto ownership and financing. For Visa, it’s still early.
“Think back to the early days of social media — it was hard to imagine that every major brand would have an actively managed account and interact directly with these online communities,” said Sheffield.
“Similarly, while Visa is one of the first major brands to do so, we expect that over time, many brands will recognize the value of collecting NFTs to express their brand identities and connect with passionate communities of creators and collectors.”
Additionally, NFTs can open new revenue streams for small and medium sized businesses, making the transfer of goods faster, easier, and more efficient. Sheffield noted that with the ecommerce boom, SMBs have gained the ability to reach global audiences with their products, though with high upfront production and shipment costs. “NFTs give small businesses an opportunity to harness public blockchains for producing digital goods — which can be delivered instantly to a crypto wallet,” he said.
How far will Visa’s dedication to project NFT go? Well, Visa will likely purchase more NFTs to add to its collection, Sheffield confirmed, with the objective of supporting a diverse group of artists and creators. The company plans to enable its ecosystem to support Visa products for this new category, too.
“We are building products and partnerships that help issuers, merchants, brands, and content platforms participate in NFT commerce – we don’t have specifics to share quite yet, but look forward to sharing more in the months ahead,” Sheffield said.
Last month, Visa entered into an agreement with Zipmex, a trading platform for crypto-fiats, in a bid to make crypto transactions more convenient. With this, Visa aims to provide further crypto payment integration in the Asia-Pacific region. During an earnings call in January 2021, Visa reaffirmed its commitment to building cryptocurrency payment and fiat on-ramps in a bid to support digital asset trading.
The NFT market has been growing lately. The first half of 2021 saw a record $2.5 billion in NFT sales, up from just $13.7 million for the comparable period in 2020. On August 28, OpenSea, an NFT marketplace where 98% of ethereum based NFTs are traded, set an all time weekly trading volume record, hitting $1.14 billion.