There are applications for NFTs that make perfect sense and will live on, but there are also flawed NFT implementations, and there are NFTs that proport to manage assets that simply won’t stand the test of time. There are investors and consumers getting involved in NFTs today based on the wrong assumption that they can only go up in value. Even worse, there are criminals making trades simply to inflate the value of an NFT and implementing money laundering using NFTs. Unclear in the press release – but identified in a blog as something that will be announced in the future – are the criteria for acceptable NFTs that will become available for purchase and how issuers will manage the risk.
Mastercard suggests that buying digital goods should be as simple as buying a T-shirt or coffee pods on an e-commerce site. The recent move aims to eliminate the layers and obstacles in the process of purchasing NFTs. Mastercard and Coinbase could make significant improvements to the NFT environment if they created regulations and monitoring of the NFTs that they intend to enable. Here’s how Coinbase and Mastercard are thinking about the partnership:
“As part of the agreement, Coinbase customers will be able to use Mastercard credit and debit cards to make purchases on the crypto exchange’s upcoming NFT marketplace. Coinbase unveiled late last year plans to launch the platform for minting and buying nonfungible tokens, which have exploded in popularity over the past 12 months.
By teaming up with Mastercard, Coinbase executives said they’re looking to reduce friction in the NFT buying process. Right now, that often requires customers opening up a crypto wallet, buying digital currencies, then spending those on NFTs in an online marketplace. Mastercard, meanwhile, said it’s looking to help expand consumer choice on how to pay for NFTs.
“Getting more people involved safely and securely is perhaps the best way to help the NFT market thrive. As it does, Mastercard sees even greater potential for NFTs’ underlying tech to go beyond art and collectibles into many more areas,” Mastercard’s Raj Dhamodharan said.”
Mastercard’s issuers have much to consider in enabling purchases of NFTs, going beyond the credibility of these products. The question is: To what extent should the industry regulate consumer purchasing? With current technologies, issuers can predict how well the cardholder manages their household budget, but they can also dig deeper into what the customer is purchasing. Networks today will not accept some merchant types. Does the industry have the right to control whether good judgment is evident if a cardholder begins to buy weapons via an NFT?
Payments cards can be empowering, but data privacy is also important. With NFTs, finding the line between cool and creepy is an important issue that will affect both payments companies and consumers over the next decade.
As it relates to NFT, should issuers simply manage the cardholder’s open-to-buy limit, and ensure that if transactions are legal that they should glide through the authorization system, or does the issuer have the right to decide where the card can be used? And what do we do about the consumer who wants to gamble on an NFT with money that they do not have? Should they be controlled at the point of sale or does the cardholder have the right to speculate on a credit card account which repays their debt, with interest?
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group