Blockchain Smart Contract for Secure Buy Now Pay Later Funding
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Solution Overview
Problem
Current 'buy now and pay later' services face challenges such as high fees for merchants, slow loan processing, limited availability for consumers, and significant costs for service providers due to tight profit margins and limited underwriting resources, with startups operating at a loss despite charging high interest rates and commissions.
Innovation Solution
A system integrating a payment option into a transaction interface that uses a blockchain to create smart contracts for secure transaction funding, allowing consumers to access loans directly within the payment process, eliminating the need for third-party service providers by transferring funds from a financial institution's digital wallet to a retailer's wallet, and enabling real-time loan management and payment processing.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Adaptability or versatility
If third-party service providers are used to extend credit to consumers, then consumers can access buy now and pay later options, but merchants incur significant fees that reduce profit margins
Solution Approach 1:
The patent extracts the intermediary third-party service provider from the transaction flow. Instead of using external service providers that charge merchants fees, the system enables consumers to directly access credit from financial institutions through integrated payment interfaces, eliminating the need for intermediary providers and their associated fees.
Solution Approach 2:
The patent introduces a new intermediary mechanism - a smart contract on the blockchain - that facilitates direct credit transactions between consumers and financial institutions without requiring traditional third-party service providers. This smart contract intermediary automates the credit extension and repayment process, reducing reliance on external service providers.
2Reliability
If service providers implement slow loan processing to minimize risks, then underwriting risks are reduced, but loan processing speed decreases
Solution Approach 1:
The patent changes the fundamental parameters of loan processing by moving from traditional manual underwriting to automated blockchain-based smart contracts. This transformation enables near-real-time loan processing while maintaining risk control through programmable credit criteria and automated enforcement mechanisms embedded in the smart contract.
Solution Approach 2:
The patent replaces the mechanical underwriting process with an automated electronic system based on blockchain technology. Smart contracts automatically execute credit decisions and repayment enforcement without manual intervention, eliminating the need for slow, risk-averse manual processing while maintaining or improving risk control.
3Reliability
If consumers must access payment options at specific locations within merchant stores, then service availability is limited, but transaction security is maintained
Solution Approach 1:
The patent makes the buy now and pay later option universally accessible through integration with existing payment interfaces. Consumers can access credit options at any point during the checkout process regardless of location within the store, as the service is embedded in the payment system itself rather than requiring specific dedicated locations.
Solution Approach 2:
The patent merges the credit extension functionality with the existing payment interface. By integrating the buy now and pay later option directly into the payment flow, the system combines transaction security protocols with credit access, allowing consumers to securely access credit options at any point in the checkout process without requiring separate dedicated locations.
4Loss of energy
If startups charge high interest rates and commissions to operate, then they can cover costs, but they operate at a loss due to tight margins
Solution Approach 1:
The patent extracts the commission-taking intermediary service provider from the ecosystem. By enabling direct credit transactions between consumers and financial institutions through integrated payment interfaces, the system eliminates the need for intermediary providers that charge commissions, allowing financial institutions to directly cover their costs without relying on high commissions from merchants.
Data Source
AI summary
When a consumer checkouts out, the transaction interface presents a buy now pay later option selected by the consumer for payment of a transaction. Consumer information is collected through the interface and a registered financial institution (FI) is presented the transaction details and information for servicing a loan. Terms are provided from the FI and presented to the consumer through the interface. Acceptance by the consumer causes a smart contract with the terms and parties of the loan to be generated in a blockchain (BC) and payment processed by the BC by transferring funds from a FI wallet to a retailer wallet associated with the transaction.