When a preexisting trust relationship exists between a merchant and a customer, e.g., as is common for neighborhood stores, merchants may extend informal credit to known customers. Such credit is typically recorded in physical credit books, since the effort to create and maintain credit entries may be onerous for the merchant. However, such practices may not allow merchants to correctly gauge risk and can also suffer from a trust deficit since the customer does not have access to the merchant’s credit book. This disclosure describes a form of payment that a customer can use to avail informal credit from a merchant via a digital payment app. Under this form of payment, the merchant is the lender, and owns the risk of the customer’s default. The merchant can, on the fly, decide whether to extend credit to the customer, e.g., based on the customer’s credit rating, existing overall credit, the merchant-specific outstanding credit, or other factors.
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Aggarwal, Ankit, "On the Fly, Informal Credit Using Digital Payment App and Digital Credit Book", Technical Disclosure Commons, (August 24, 2023)