Digital Payment Promise Transfer for Unbanked Credit Networks
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Solution Overview
Problem
Banks face difficulties in evaluating the risk of unbanked and underbanked populations due to their lack of established credit and transaction history, making it challenging to provide financial services that accommodate their traditional cash flow and financial practices.
Innovation Solution
A method and system that enables the electronic transfer of digital payment promises, or IOUs, among users based on predefined preferences and rules, allowing for the creation of a credit network that does not require personal knowledge of other users and allows for the definition of conditions such as geographic location, transaction history, and personal information for transaction approval.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If banks evaluate risk of unbanked and underbanked populations, then financial service reliability improves, but the complexity of risk assessment increases due to lack of credit history
Solution Approach 1:
The patent introduces a digital promise to pay as an intermediary instrument that mediates between the merchant and the unbanked customer. This digital promise serves as a standardized credit instrument that can be transferred and evaluated by banks, replacing the need for complex direct risk assessment of customers without credit history. The digital promise acts as a mediator that transforms informal credit relationships into formalizable financial instruments.
Solution Approach 2:
The patent creates a digital copy or representation of the informal promise to pay relationship. Instead of assessing the actual unbanked customer's creditworthiness directly, the system creates a digital promise instrument that replicates the essential terms and conditions of the credit arrangement, which can then be evaluated and transferred through standard financial channels.
2Stability of the object's composition
If merchants wait for customer payment on agreed date, then cash flow stability improves, but the time to restock inventory increases
Solution Approach 1:
The patent enables merchants to take preliminary action by transferring digital promises to pay to third parties (such as banks or factors) before the actual payment due date. This allows merchants to obtain funds in advance to restock inventory, rather than waiting for the customer's payment. The digital promise is transferred and discounted ahead of time, providing early liquidity.
Solution Approach 2:
The patent introduces dynamic flexibility to the credit instrument by allowing the digital promise to pay to be transferred to multiple potential third parties. Rather than being locked into waiting for the original customer's payment, the merchant can dynamically transfer the promise to any willing third party who will accept it, optimizing cash flow timing based on market conditions.
3Adaptability or versatility
If banks provide loans to unbanked population, then financial inclusion improves, but the risk of default increases due to lack of transaction history
Solution Approach 1:
The patent introduces the digital promise to pay as an intermediary instrument that bridges the gap between unbanked borrowers and formal financial institutions. Instead of banks directly extending credit to customers without transaction history, the digital promise serves as a standardized intermediary instrument that encapsulates the repayment obligation and can be evaluated through transferability and market acceptance rather than traditional credit scoring.
4Ease of operation
If merchants accept informal payment promises, then ease of transaction improves, but the difficulty of transferring these promises increases
Solution Approach 1:
The patent creates a standardized digital copy or representation of the informal payment promise. This digital instrument replicates the essential terms of the original informal agreement but in a standardized format that can be electronically transferred, assigned, and traded through formal channels, eliminating the complexity of transferring informal arrangements.
Data Source
AI summary
A method includes electronically receiving at a user device of a second party a digital promise to pay a certain amount of money in exchange for goods or services from the second party, the digital promise to pay being generated by a user device of a first party; electronically sending a request from the user device of the second party to a user device of a third party to electronically transfer the digital promise to pay to the user device of the third party in exchange for goods or services from the third party. Sending the request includes sending at least one set of preferences defined at least by the first party. The method further includes electronically receiving at the user device of the second party from the third party one of an acceptance or a rejection of the request to transfer the digital promise to pay.