Over the past two weeks, CivicScience has taken a fresh look at evolving financial tech trends among American consumers. We saw demand for online banking drop despite banks leaning harder into it, and the rising profile of cryptocurrency despite very few knowing much about it.
This week, we take a deeper dive into a cryptocurrency offshoot with a growing profile of its own: non-fungible tokens, or NFTs for short. You may have seen recent reports of one investor buying a digital artist’s NFT for $69 million, or of a LeBron James highlight going for approximately $200,000 on a popular marketplace.
But what are non-fungible tokens? Like cryptocurrency, the answer is very complicated. The easiest way to think of it is to imagine a digital baseball card or piece of art. Because digital files can be easily replicated, the value is derived from its blockchain source code (note: blockchain tech is also what gives cryptocurrency value). Unlike cryptocurrency, however, NFTs aren’t traded like commodities or currencies on the open market, but sold as individual assets, again, like tangible artwork, first-edition comic books, or baseball cards.
In any case, regardless of its rising profile, the general population is still less aware of it than it is of cryptocurrency.
There are already many publicly traded NFT development companies that have platforms available for anyone to shop through (OpenSea and Rarible are two currently well-known marketplaces). Despite that, investors are jumping in on the burgeoning craze. Long-time NFL quarterback Tom Brady recently made news with his plans to launch an NFT platform called Autograph. Even though Brady’s plans may capitalize on sports-themed NFT products, his name and popularity may not be enough to help the business take off.
Ninety-five percent of the general population wouldn’t be any more comfortable investing in NFTs backed by celebrities or athletes. While this reticence may be related to overall trust in the tech, it may be more related to overall interest in the assets.
Eighty-eight percent of the general population simply does not have interest in NFTs at this time. Unsurprisingly, interest in NFTs is largely driven by the youngest age demographics and the highest income levels. Though notably, those earning less than $25,000 in annual income also have a substantial interest in buying some digital assets.
These age and income correlations raise an interesting question: why do people buy or invest in NFTs?
Though the margins of responses are small, the most common answer as to why people would be interested in buying NFTs is as a short-term, speculative investment. Interestingly, despite this trend, nearly equal amounts of people, when asked what they would expect from an NFT if they were to buy it, wouldn’t expect them to grow in value.
Perhaps people simply do not see potential growth in the value of NFTs. But despite that, they also don’t see them growing in popularity as collector’s items.
Again, younger demographics seem to be more open to the idea of NFTs as collector’s items.
The data here likely suggests that overall understanding of NFTs as tech assets is the primary factor in understanding how they might be valuable to an individual. Or in other words, awareness and understanding is still too low among the general population for trends to become clear.
Regardless of an individual’s personal outlook on buying or investing in NFTs, there is a clear link between cryptocurrency and NFTs.
Those who are invested or planning on investing in cryptocurrency are also the most likely to have invested in or be interested in investing in NFTs. Most likely, comfort and awareness with the blockchain technology behind both fin-techs transfers between groups, as does discomfort or disinterest.
Reasons for not purchasing or investing in NFTs also bear similarity to those for not investing in cryptocurrency.
Aside from an overall lack of interest, the general population simply doesn’t understand what NFTs are and how they work, perhaps implying NFT companies’ efforts are best geared towards educating markets outside of just the young or high-earning.
There Is a Desire for Something Different
The emergence of blockchain technology with cryptocurrency over the last 15 years or so has been shifting the financial marketplace into unknown territory, as it allows users to look for alternatives to the established banking marketplace. And according to CivicScience data, that is exactly what some consumers might be seeking.
Approximately one-fifth of the general population is at least somewhat interested in alternatives to traditional banking and financial structures. That is a significant amount of demand from a consumer market.
Predictably, this trend is stronger among younger demographics, which implies that the demand for nontraditional financial structures will only increase as these populations grow in purchasing power.
This trend for alternatives also increases among income levels, which seems to imply that the more income someone has, the less risk-averse they are to new and changing investment opportunities, again an opportunity for alternative investment channels to seize on willing and interested markets.
Similar to cryptocurrency, NFTs are most recognized among younger and higher-income demographics, overall. Though new efforts to make the tech more accessible and available, such as with Apple’s new S!NG app, are likely to bring in new consumers and content creators who might benefit from NFTs’ inherent copyright protections.
But the bigger question to look into is, why are people looking for alternatives to traditional banking and financial structures with fin-tech like crypto and NFTs? Be sure to look for our upcoming report on trust in financial institutions, like banks and trading platforms, and an in-depth look at shifting consumer opinions.