CashNow: Payday lending at affordable rates

Summary: CashNow provides Americans with cash advances at affordable rates far cheaper than traditional payday lenders by sourcing loans from an open network. Borrowers are able to instantly get loans with no collateral. This marketplace turns peer-to-peer loans, which have no recourse for defaulting, into a legally-binding contract where a default impacts a user’s credit rating. It connects onchain liquidity, which offers the most competitive rates, to offchain borrowers, who are currently stuck with limited options and uncompetitive rates, via a US-dollar-pegged stablecoin (USDC) which is now instantly transferable to bank accounts.

CashNow offers cheap same-day loans while requiring limited information and no collateral

Current options
Their problems
Our solution
Payday lending brick-and-mortar stores
❌ Average of 372% in California
✅ Rates decided by free market, which should be dramatically lower
Online personal lending solutions
❌  Require a lot of information, disqualifies many users
✅ Requires only credit rating and identity verification
Decentralized lending protocols
❌  Loans only available to users who have collateralized deposits
✅ Loans with no collateral
CashApp Lending feature
❌  High APR of 65%, requires CashApp account
✅ No transaction history and account required

Overview of how this works

  1. Someone with USD who wants to earn yield, called a liquidity provider, sets rates that they’re willing to loan their USD-backed stablecoin based on an individual’s credit rating. These rates differ based on the credit rating (eg. 15% APR for 800+, 50% for 600-640)
  2. An American user signs up on a traditional website. It collects their personal information, verifies identity, and fetches their credit rating. They are instantly approved for a small loan ($100-$300), and offered the best rate that from all liquidity providers.
  3. To accept, the user signs a legally-binding document that complies with the Fair Credit Reporting Act (FCRA). If the money is defaulted, the details of this loan and ensuing default is reported to credit bureaus, which would reduce a user’s credit rating. This serves as a deterrent to default.
  4. Money arrives in USDC, which can be withdrawn from an ATM immediately.

It enables onchain liquidity to serve offchain loans with offchain recourse

Onchain systems suffer from anonymity, such that loans are only offered based on overcollateralized deposits. This doesn’t meet the needs of ordinary users with limited assets and urgent cash needs.

CashNow only serves Americans with a credit rating. It is a marketplace that matches onchain liquidity with offchain loan needs. This marketplace turns peer-to-peer loans with no recourse for defaulting, into a legally-binding contract where a default impacts a user’s credit rating.

Why now?

  • Circle, the issuer of a USD-pegged stablecoin, has worked with many banks to offer instantaneous redemption at US banks. This bridge connecting onchain liquidity and offchain institutions has only recently been enabled.
  • There is significant capital online looking to be deployed. Online crypto lending protocols are all looking for sustainable sources of borrowers, rather than suppliers, of assets.

There is always a rate that makes sense for anyone

Assume you have X% chance of guaranteed APR for X time duration and Y% chance of losing your capital because user defaults. If rates are set on a curve based on a user’s credit rating, there is always a rate that makes sense.

For someone with a poor rating, even with high expectation of default, rates are available but may be astronomically high. For someone with great rating, rates should be close to the risk-free rate.