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Visa (V) Penetrates NFT Commerce Via CryptoPunk Purchase

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In an act of showing support and being the first mover in the burgeoning non-fungible token (NFT) market, Visa Inc. (V - Free Report) bought a CryptoPunk #7610, one of 3,840 female punks, for 49.50 ETH ($149,939) last week.

CryptoPunks, a collection of pixel art images, is one of the digital avatars that was developed on the Ethereum blockchain. The one that Visa bought is an NFT of a female character with a mohawk, clown-green eyes and a bright-red lip color.

What is an NFT?

As the name suggests, it is a digital token, which is non fungible, meaning that it cannot be exchanged. Consider a traditional currency or even the crypto currencies that can be exchanged. For example, a $10 bill can be exchanged for 2 dollar $5bills but with NFTs, that is not the case since those are unique products, which represent ownership in the digital form of any product varying from artwork, paintings, songs, video tweets, NBA tickets to possession of a real estate, etc. What makes NFT not exchangeable is that it is a unique asset and cannot be directly replaced with another one.

NFTs are being viewed as an efficient way by individual retailers, businesses, celebrities, artists to sell their products directly to buyers, thus cutting off the intermediaries in a traditional transaction who take a cut in the payment. Also, NFTs have a huge scope in more mainstream commerce.

Although the NFT market is in its initial stages, it is already frenzy rage in the digital art and creation ownership. Recent instances where NFTs were sold at jaw-dropping prices were the sale of the first-ever published tweet of Jack Dorsey, the Twitter CEO, for $2.9 million via an NFT.

In yet another instance, an NFT of an image entitled "Everydays: The First 5,000 Days" by artist Beeple fetched $69 million. The difference in buying art in the form of an NFT is that it cannot be displayed on your walls in physical form but can be exhibited virtually.

Visa Eyes Potential Growth in the NFT Market

NFTs are rapidly gaining traction and Visa expects  continued growth from this particular market. This is witnessed by its sheer growth to $1B in payment volume  in August alone, up from  less than $100M in whole of 2020.

According to Visa’s vice president and head of Crypto Cuy Sheffield, NFTs are one of the ways to buy, sell and own digital goods and will pave the path for new methods of collecting. These can also be used in conducting commerce across social media, retail and entertainment channels.

Per management, NFTs could also boost small and medium-sized businesses (SMBs) in powerful new ways. The boom in e-commerce made it possible for SMBs to sell online and reach customers around the globe. But these  businesses  still have to produce and ship physical goods, which can have high upfront costs.  NFTs give small businesses an opportunity to harness public blockchains for producing digital goods, which can be delivered instantly to a crypto wallet. We can envision a future in which one’s crypto address becomes as important as the mailing id.
Visa is eyeing the NFT space and seeks the intermediary position to make NFT-commerce accessible and useable for buyers and sellers. To this end, the company is looking to help brands and businesses better understand the concept of NFTs.

Since the company is head on penetrating the NFT space, it won’t be surprising to hear about it forging partnerships that support NFT buyers, sellers and creators.

Visa is the first company in the payments space to dip its toes in the NFT space. It is also hugely backing crypto currencies by aggressively allowing payments in digital currency through its network. In the first half of 2021 alone, the company facilitated more than $1 billion worth transactions via crypto-linked Visa cards.

Blockchain holds the key to the future as it looks set to bring about a sea change in the payments industry. Visa has always led the pack in terms of adopting the revolutionizing ways and the NFT move only proves its commitment in that direction.

Year to date, the stock has gained 7.1% against its industry’s decline of 8.7%. Other companies in the same space Mastercard Inc. (MA - Free Report) , American Express Co. (AXP - Free Report) and Discover Financial Services (DFS - Free Report) have also increased 1.4%, 33.3% and 42.8%, respectively, over the same time frame.  
Visa carries a Zacks Rank #3(Hold), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.