5 main factors why the fintech industry can profit from NFTs

Over the past ten years, FinTech has had a huge impact on the global financial sector. India is recognized as a major FinTech hotspot globally and the promising India Fintech sector is expected to reach $1Tn in total and $200B in revenue by 2030. By 2021 funding for fintech saw a 3X increase. An organic and collaborative environment has encouraged this expansion, which has also been supported by significant government programs.

With the rise of new technology and the rise of cryptocurrencies, NFTs also came into the limelight with major creators and artists launching their own collections, to understand all this first we need to know what NFTs are. NFTs are tokens that represent rights to underlying digital content stored on a blockchain. While governments around the world are wary of cryptocurrencies, NFTs have been (relatively) warmly received, especially by the entertainment industry and creative artists. NFTs take on an aspect of exclusivity since they are non-identical by nature and valued due to their uniqueness. The “charm” of having a unique connection to the underlying work of an artist, brand or other entity has led certain NFTs to be seen as collectibles, with high demand from experts. This also applies to India. According to a recent survey, India has the third largest number of NFT companies headquartered worldwide.

Remarkably, the global market for NFT sales volume increased almost 200 times in the first half of 2021 compared to the same period in 2020, reaching a whopping $2.5 billion. As a result, it is no surprise that many regular users, investors and financial professionals see more rewarding potential in the NFT development and are working hard to secure a large market share.

Here are 5 points that can help us understand NFTs better

How can Fintech institutions use NFTs?

NFTs have already had a major impact on the cryptocurrency market. With great transformational and unifying potential in the financial sector, NFTs are expected to merge with other blockchain applications to create an entirely new financial infrastructure. And the first thing that comes to mind when you think of NFTs is the connection with decentralized finance (DeFi). DeFi is a rapidly growing financial system based on blockchain technology that aims to abolish the control of banks and institutions over money, financial products and financial services.

NFTs and DeFi were initially offered as separate applications, but it became clear over time that NFTs could become a viable instrument for DeFi.

Despite several challenges to overcome and some aspects to streamline, many experts have already defined the way fintech players can use tokens to their advantage.

More number of partnerships and new consumers

The simplest and most obvious approach to using NFTs for the benefit of financial institutions is to participate in sales or to organize a competition where new customers can win an NFT. In addition, NFTs can be used to produce liquidity. Many financial companies create projects where they offer innovative NFT-based services.

Finally, the NFT boom may encourage more traditional market players to join, resulting in more beneficial alliances and new solutions to gain traction in the industry. NFTs can also be used to create liquidity in addition to this. The initiatives that many financial institutions are taking up offer new services based on NFT trading.

How NFTs are likely to change FinTech

It is likely that NFTs will continue to capture attention in the near future. The market for these tokens has already attracted a significant amount of capital, and it looks like it will continue to expand in the coming months. The growth of NFTs could have a significant impact on fintech. The innovation for fintech will, at least initially, come from the combination of NFTs and DeFi. For example, new DeFi services use NFTs to provide liquidity. New services based on NFT trading are offered by a few DeFi firms and community initiatives. As more digital assets become NFTs, this could lead to the creation of entirely new asset classes and change how investors make decisions.

Although there are still issues with NFT’s security and environmental impact, these tokens are expected to have a greater impact on the financial industry and fintech than they already have.

How much risk is there while investing in NFTs

Regardless of the fact that any investment is a risky business with many aspects to consider, the thrill of wealth and the possibility of big gains continue to entice the early adopters looking for new ways to make a fortune.

Patience is currently the wisest course of action for investors because the market is still relatively young and all significant processes still need to be rationalized. Investors can invest in NFTs, but this should only form a small part of their overall holdings. If something goes wrong, there will be no noticeable damage, but it will still be possible to make money.

Furthermore, the risk of fraud is always present where large sums of money are involved. The NFTs are no longer yours if a hack causes you to lose control of your asset.

NFTs can lead to DeFi innovations

The future of decentralized finance may depend heavily on NFTs (DeFi). These are fintech initiatives that aim to undermine current financial intermediaries using cryptocurrencies or the blockchain. NFTs can offer an alternative to existing crypto fundraising strategies, such as coin IPOs, for fintech companies looking to make investments in the cryptocurrency field or introduce their own DeFi services.

Other recent NFT-associated DeFi projects demonstrate how fintech can evolve as the cryptocurrency industry continues to expand and attract new investors. For example, NFT-related funds are starting to emerge in the same way that blockchain stocks and funds did in reaction to the increasing value of the crypto industry.

To summarize

While the non-fungible token concept is still in its early stages, it has already shown a high potential for significant returns for its holders, producing real value for both buyers and sellers. NFTs can be used as a stand-alone instrument for a variety of activities or as a component that can be combined with other applications in the blockchain ecosystem.

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