Xcapit Xscrow

In Latin America, a significant issue is the high rate of loan rejections by lenders due to inadequate credit assessment tools for individuals, resulting in 65% of the population lacking access to financial services. A single Argentine financial institution, with over 5 million customers and 40 years of experience, turned down 3.5 million credit card applicants in 2022 due to insufficient credit history. In the credit sector, lenders have an average rejection rate of 90% when processing loan applications. Furthermore, informal sources of income sustain 50% of the population, with only 14% having saved or invested with a financial institution

Our solution is a Web3-enabled smart contract escrow infrastructure designed for lenders to offer credit to unbanked individuals in their local currency. With 100% liquid and self-executing collateral, our platform minimizes risk for lenders while giving individuals control over their credit history and custody of funds. Leveraging Web3 technology, institutions can offer credit to unbanked individuals. For our pilot, we use the Ionic framework with Angular. Our contracts are developed using hardhat, OpenZeppelin contracts, Chainlink contracts and other technologies such as Solidity, Remix and GitHub. Our solution is similar to the collateral infrastructure in the payments industry provided by companies such as Pomelo, Menta and Stripe.

Characteristics: The warranty is 100% liquid, credit scoring doesn’t matter anymore, the capital is held in stablecoin (USDC), there is no risk of default, the custody of the capital is not held by the lender or the borrower, it is found in a smart contract on the blockchain.

Our demo: https://www.youtube.com/watch?v=aToXERrhyYA

Step by step, how its works:

1-The collateral service is customized in conjunction with the lender.

2-Applicants interested in obtaining a loan or an increase in the amount of credit access to the possibility of assembling this guarantee with digital dollars.

3-The lender is notified that the user has made a guarantee, and grants credit

4- The borrower repays in local currency and may request the withdrawal of the collateral if there is no debt. In case of default, the lender accesses the collateral funds

Our infrastructure is targeted towards credit providers or lending institutions such as banks and fintech companies that aim to expand their business while minimizing risk. Our escrow service allows individuals without traditional bank scoring to access credit in their local currency, but with savings in stablecoins, to obtain a credit card and begin building a traditional credit score. Additionally, we encourage the habit of saving before spending.

With our solution, lenders can safely lend money without taking on additional risk, as the guarantee self-liquidates in case of default

Since our inception in 2018, our team has been dedicated to promoting financial inclusion through education, investment, and habit-changing. With investments from UNICEF Innovation Fund and partnerships with Ethereum's BLS team and Polygon, we have the necessary blockchain and development skills to scale our solution. We have a deep understanding of the problem, as we are based in Argentina and have firsthand experience with the challenges associated with accessing financial services in LatAm. Our team is also diverse and multidisciplinary, with a valuable network of partners to support our efforts.

We have partnered with a financial institution in Argentina to improve access to credit for individuals. To ensure our solution meets the needs of our target users, we have directly involved them in the development process and incorporated their feedback into our UX and UI design. Additionally, we have worked closely with the financial institution's team to optimize the user flow and make the solution more user-friendly.

Despite the challenges and changes in the industry, we remain committed to our passion for solving this problem. We are confident that our team has the necessary experience, skills, network, and commitment to successfully develop this project

We are conducting a pilot test with one of the three biggest credit card issuers in Argentina with 5 million cardholders. We want to decrease their rejection rate. In 2022, 3.5 million individuals were rejected and couldn’t obtain a credit card. The pilot is focused on the first 1000 clients in order to progressively iterate the user experience and the user flow

Our aim in applying to SOLVE is to expand our partnership network and extend our solution to underbanked populations in areas with limited credit access. We seek guidance, inspiration, and advice on how to effectively introduce our solution and make a positive impact in other countries. Given the positive impact we are making in Argentina, we are motivated to adapt it to other geographies and change more lives.

We offer a blockchain-based B2B infrastructure that streamlines the processing and approval of large-scale loans for companies. Our innovative solution complements or replaces traditional credit scoring methods without increasing risk, thereby expanding the credit portfolio of enterprises seeking to reach new markets. Our approach is distinctive in several ways, including our self-custodial system, focus on Latin America, provision of credit in local currency with stablecoin collateral, and facilitation of individuals' entry into the traditional banking system to establish their credit scores.

We have developed a unique methodology for consulting on and off-chain oracles to verify the redemption of guarantees, which is an innovative feature not found in other solutions. Our platform promotes a culture of saving-before-spending and access to credit, supporting the development of sound financial habits in Latin America

From a technological standpoint, our goal for the next six months is to develop integration services for businesses and smart contracts, have them audited by OpenZeppelin or a similar entity, and successfully complete a pilot with an Argentine financial institution. Additionally, we plan to map out improvements for user experience and user interface.

Over the longer term, we aim to expand our funnel of financial institutions across Latin America and reach populations lacking access to credit in order to enhance their business and financial well-being. We will achieve this by working closely with our network, including UNICEF, Polygon, Santander Rio, and other industry partners. We will also seek to understand the impact of our work and identify potential partnerships with microlending and microcredit organizations.

Our ultimate goal is to establish an escrow and trust index that can serve as a benchmark for other financial institutions and non-custodial wallets. By doing so, we aim to empower individuals to become the owners of their credit score, eliminating the need to rely on fragmented and non-borderless credit information.

No Poverty: % of people who have gained access to credit and no longer live below the poverty line per country.

Zero hunger: % of people who have gained access to credit and are now able to feed their family per country.

Gender equality: % of women who have gained access to credit per country.

Reduced inequalities: The % of people from historically marginalized communities who have gained access to credit.

Our blockchain-based infrastructure for financial institutions provides access to credit, helping individuals in Latin America improve their financial standing by entering the traditional banking system and building credit scores. This leads to greater economic mobility and reduced inequality. By setting up a guarantee, we encourage the habit of saving-before-spending, which avoids the financial burden of spending more than they earn, a common issue among low-income populations.

Problem: Many individuals in Latin America lack access to credit, which limits their ability to grow and improve their financial well-being.

Solution: Our blockchain-based B2B infrastructure provides a streamlined way for financial institutions to process and approve large-scale loans without relying solely on traditional credit scoring methods. By expanding access to credit, our solution helps individuals enter the traditional banking system, build credit scores, and improve their financial standing, leading to greater economic mobility and reduced inequality.

Activities: To achieve our solution, we've developed integration services for businesses and smart contracts, audited these contracts for security and reliability, piloted the solution with a financial institution in Argentina, and partnered with organizations like UNICEF and Polygon to expand our reach.

Outputs: Our activities have resulted in the successful integration of businesses and smart contracts, completion of a pilot program, and expansion of our partnership network.

Outcomes: Our solution has led to increased access to credit for individuals in Latin America, which has resulted in greater economic mobility, improved financial well-being, and reduced inequality.

Traditional Web2 technology lacks the ability to provide individuals with control over their credit history and the custody of their funds. This approach to collateral and credit scoring is not possible with centralized systems that rely on intermediaries. That's where Web3 technology comes in. Our solution leverages Web3 technology to give custody to individuals, which enables access to unbanked populations at competitive interest rates.

Our solution is also built to be a standard that other wallets or financial institutions can leverage, allowing for collaborative building. Web3 technology provides a scalable and interoperable architecture that seamlessly integrates with internal systems, reducing administrative burdens and creating a smoother user experience.

To develop our pilot, we use the Ionic framework with Angular. We use ethers.js for interaction with the blockchain and develop our contracts using hardhat, OpenZeppelin contracts, and Chainlink contracts.

Our primary contract, the factory, is used to deploy and configure Xscrow, which is composed of two contracts: an escrow and an oracle. This pair of contracts can be securely configured to interact with each other, and only the owner has ownership control to perform updates and certain actions if necessary. Our solution leverages Solidity, Remix, GitHub, and more

We have a diverse team with members from various countries such as Argentina, Venezuela, Spain and previously from Mexico. With the support of UNICEF, we have implemented policies during the hiring process to promote inclusion, diversity and equality. We have also strived to have a gender-diverse team and women in leadership positions.

We conduct user studies with a wide range of people to ensure that our product is accessible and beneficial to everyone, regardless of their background or identity. We also regularly evaluate our internal policies and processes to identify areas where we can improve our inclusion and ensure that all team members feel valued and supported.

In the past we chose to modify our branding, which lacked sufficient contrast, and we even explored making significant modifications to improve the user experience for blind people. We want to ensure that our solutions are accessible to everyone, regardless of any physical or cognitive disabilities they may have

Our business model:  We charge an annual guarantee set-up fee of 2% of the guarantee amount and an enforcement fee of 5% in case of default. The institution is charged a one-time, fixed fee for integration into its system

Our primary objective is to secure funding from investors, with a target capital round of $500K. However, our long-term goal is to achieve financial sustainability through the revenue model we have developed. The partnership with the Argentine institution for our pilot project presents a significant opportunity for growth. Based on the institution's projections, we anticipate sales of up to $1 million within 12 months after we finish the pilot. These sales will be generated through four main revenue streams: integration fees, commissions for setting up guarantees for new credit cards, commissions for increasing credit limits on existing cards, and commissions for executing guarantees.

We have raised $1.02 million US dollars in funding from a Canadian VC and nine angel investors. 

In addition, we have received over a million US dollars in equity-free funding, including $100K in Ether from the UNICEF Innovation Fund and $468K USD from various governmental and non-governmental programs. Besides we raised from a Gitcoin campaign and we had cloud credit grants.