Transforming the credit system into an open platform that actually engages with users known to each other personally and builds on mutual trust/responsibility to repay and obligation to lend, in order to reward ALL users. I called this "save with friends" as opposed to loans with banks whereby users have to determine who they can trust lend and borrow. CAUTION USE AT YOUR OWN RISK: This system can either make more friends whom you can trust or weed out those whom you can't. See our video for short explanation or read below to your heart content. Download and start learning to trust each other again.
Our US patented system uses syndication where you can invite your friends on FB to join. The system allows users to bid for the pooled funds, users are predetermined by the first user (lead syndicator). All bidders will bid applying a discount from principal amount. The highest discount will win and the bidder becomes the borrower and the rest lenders. Say the principal is US 100, and the borrower bid 90 (discount is 10) will receive 90 and repay 100. This winner is excluded from the next bidding. For example, where there are 3 bidders (A,B,C), 1 week each and principal is 100. The first auction, A is the winner with 90, so A will receive 90 from B,C in total 180. In second auction in second week, only B & C will bid. Let say B bid with 80 (discount 20) and he is the winner then B will receive 80 from C and 100 (principal) from A (previous loan), so in total he received 180. In week 3 there is no bidders left except for C, so he will receive 100 from both A & B. The cost of borrowing for A is 11.1% (ie 20/180) and the cost of borrowing for B is 10% (ie he earn 10 from A and pay 20 to C which net is 10 to borrow 100 from C) and the cost of lending by C is 17.65% as he received 10 from A and 20 from B and total lend is 90+80 = 170 (30/170). Therefore whether a bidder will be a borrower or lender depends on his appetite for the pooled funds. So unlike peer to peer, where one knows who the borrower is at the outset, in this case it is determine by bidding. Similarly, it benefits both sides as bidders who have lend and then borrow, will see his costs of borrowing lower because he actually receives interest from those who have borrowed from him. Those who wish to lend then will see the maximum return being the last. The system is also fair in that only one bidder can be the winner at each round and will be excluded thereafter giving everyone a chance. The risk is shared by all, for example say in the first week above, A refuse to pay. This means only B&C will suffer the loss in the proportion lend out, in this case 80 each and will forever loss A as a friend. At the same time, A is obliged to pay on instalment, that is the principal at every round, so he or she knows exactly how much to pay being the principal. This system removes the middle-man completely and in fact the middle man can even be one of the bidders, so he could take advantage of the demand and supply of funds as measured by other parties interest in the pooled funds. The system depends greatly on the lead syndicator ie he must know who to invite for he is the only person that knows everyone in the group. The members of the group depends on his judgement of their creditworthiness. Currently there is no reward system for the lead syndicator but this can build in as the ecosystem gets bigger. This is not a ponzi scheme because the funds are not taken by one person but by all in the group at different time and parties are fixed at the outset. It helps friends to support each other for whatever reasons without the accompanying costs of managing this. This method is still experimental and is a first step to remove the cost of the middle-man, to have groups determine the level of interest costs transparently and to ensure trust can be created between parties (you can think of interdependent industries too).Things to be developed next, periodical bidding and transfer payments.