Friend Microcredit
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Transcript of Friend Microcredit
P r o j e c t
Easy-to-use mobile app offering a follow-up service of off-line cash exchanges/short-term peer-to-peer
microcredit within communities of mutually-trusted people, with real-time clearing of mutual
obligations and designated-time direct-debit net settlement
Vision
Principle
Within a circle of trusted friends, there are often off-line exchanges of cash
Man, I’m short of cash –can you advance me?
Punctual illiquidity
OK guys, let’s not split hairs here, I’ll foot the bill, you’ll
pay me back laterConvenience
Wouldn’t it be great to have a system to keep track of these exchanges and automatically settle mutual imbalances?
People choose friends and form circles of mutually trusted people
A’s Facebook Friends
B’s Facebook Friends
C’s Facebook Friends
D’s Facebook Friends
• B• C
• A• C
• A• B
• C• E
Etc.
Import…
• R• D
• R• J
• E• D
• F• X
• F
• Y
A
B
C
D
E
F
G
Circle 1
Circle 2
Circle 3
Pick up trusted friends from existing social networks
Each circle is composed of mutually trusted friends1 2 3
Note: C and F happen to belong to two different circles
Friends make off-line exchanges of money
To whom did you just hand out money?
Notifying
Hey. Just handed you
Can you confirm?
$9.7
0
Salma
= 5.3 + 3.4 + 1
Acknowledging
On Salma’s phone…
Push notification [Name of platform]
Hey. Just handed you 9.7$
Can you confirm?
YES NO
The system records the transaction and
recognizes an obligation from Salma to You
You
Salma
Other mutual friend
9.7
Time Event Social graph Real-time clearing per circle
0
Within a circle, mutual obligations are centralized and cleared in real time
A
B
C D
E F G
A
B
C F
D
C
E G
F
A
B
C F
D
C
E G
F+3
-3
-1
+1
+2
-2
A
B
C-2
A
B
C D
E F G3 1
2
A
B
C D
E F G3 1
22
-1
+3
A
B
C D
E F G3 1
22
5
3
A
B
C D
E F G3 1
22
5
3
A
B
C F
D
C
E G
F-2
-3
-5-1
+3 -1
+9
+2
-2
4 A
B
C+2
-1
-1
1 • A hands 3 to B• E hands 1 to C• F hands 2 to G
2 • B hands 2 to C
3 • E hands 5 to D• E hands 3 to F
4 • C hands 4 to A F
D
C
E G
F-3
-5
-1
+9
+2
-2
F
D
C
E G
F-1
+1
+2
-2
At a designated time, the system automatically settles the mutual obligations per circle
A
B
C F
D
C
E G
F+2 -3
-5-1
-1 -1
+9
+2
-2
Circle 1 Circle 2 Circle 3
C is net creditor in circle 1: +2 C is net debitor in circle 2: -1
No cross-circle clearing possible to avoid situation where a net creditor’s refund depends on the solvability/liquidity of someone n degrees of trust away
When subscribing to the platform, users agree to a direct debit framework whereby they authorize the payee (the platform) to collect the amount due directly from the payer’s account.
Direct debit agreement
At settlement time, the platform debits the net debitors’ bank accounts and makes money transfers to the net creditors
Settlement
Settling
Net debitor’s
bank
Platform’s bank
Net debitor
Net creditor’s
bank
Net creditorPlatform
Collects amount due
Lends to
Owes to
Money transfer
Net creditor’s bank account is refunded
Monthly settlement…
A
B
C+2
-1
-1
Circle 1• A’s account is debited by 1
• B’s account is debited by 1
• C’s account is credited by 2
Creditor-bank direct debit agreement (“contract”)
Platform-debitor direct debit agreement (“mandate”)
Debits net debitor’s bank account
Sends amount due
13 5
Sends amount due 2
4
Credits platform’s account
Orders money transfer
6
7
8
In other words, it’s a system of short-term, peer-to-peer
microcredit
1. Risk of counterparty illiquidity/insolvability But, hey:
2. Business model easily reproducible But, hey, which business model is not?
3. What if off-line pre-DTNS* settlement? It’s just like any other loan –just don’t forget to notify it on
the platform
4. Won’t I look like a skinflint?
Weaknesses
* Designated-Time Net Settlement
- They’re small amounts- They’re friends/trusted people
Appendix
Mandatory fields
Unique mandate reference Name, address, postal code, country of residence of debtor Debtor’s IBAN number BIC code debtor bank Creditor company name Creditor’s identifier Address, postal code, country of the creditor Type of payment Contract Reference Signature place and time and signatures
B2C SEPA Direct Debit Mandate – Template
Creditor can decide on the format
The dematerialised Mandate-related information is transmitted by the Creditor Bank to the Debtor
Bank as part of each Collection, in one single flow