Ripio has had more than one name in its evolution as a firm – but only a single goal. Originally known as BitPagos at launch, and then rebranding to Ripio in advance of its late 2017 ICO – the Argentina-based firm wants to use the blockchain to unlock the power of P2P lending on a global scale.
“Our mission is to give access to this new network of bitcoin and other cryptocurrencies, and use it as a tool for financial inclusion,” Sebastian Serrano, CEO and co-founder of Ripio, said in an interview.
The problem with traditional credit systems, according to Ripio, is that when it comes to access, geography is more or less destiny in many cases. Consumers and businesses have to live within the boundaries of the local lending standards the local prices, because by their perspective, local access is the only game in town.
And for many customers – particularly in the developing world, where currency volatility is a fact of life – access is nearly nonexistent.
“Banks give loans and credit according to their risk capacities, and also involve inherent bureaucracy in the collections and dispersion of this information. As a result, some credit projects are too expensive relative to the would-be borrower’s creditworthiness,” said Ripio.
Looking at that problem in the early days, Serrano and the Ripio team liked P2P lending as a model that could solve that problem. P2P lenders brought nimbler processes, often lower underwriting costs due to automation and the ability to offer a greater amount of flexibility and creativity when designing the credit and underwriting standards.
But the geographic destiny issue rears its head again – in developing markets, there is a surplus of potential borrowers and no surfeit of potential lenders, and successful P2P platforms rely on a basic balance.
Which leads to Ripio’s second big founding insight: They wanted their credit platform to operate on a world stage.
The challenge in that, according to managing director David Garcia, is three-fold.
The first is cost: to make the lender’s offering compatible with their borrower. For example, ensuring that the loans are in the right currencies and amounts can get very expensive when funds are moving across borders.
The second is regulatory compliance, a necessary but tedious undertaking, particularly when it comes to lending money across borders.
The third is trust: A lender in one nation has very little recourse in the event that their borrower doesn’t pay, because they aren’t part of that borrower’s local legal system. And evaluating trustworthiness cross-border can be a challenge, because there aren’t international standards for monitoring consumer credit worldwide.
Garcia believes that Ripio solves the cost part of the equation with the blockchain and its in-house coin, the Ripio Credit Network (RCN) token.
Much like Prosper or LendingClub, Ripio gives buyers the ability to lend funds using cryptocurrencies (bitcoin and Ripple are popular, according to the firm). Those digital funds are then converted into RCN and back into local currency. The process allows Ripio to offer the service to lenders all over the world, not just local markets.
RCN is based on the Ethereum blockchain ERC20 standard, and RCN tokens are required to access the “RCN network.” Both the wallet and the exchange must implement the RCN protocol in order to interact with the other parts of the system.
Ripio has raised $37 million in an initial coin offering late last year, with a pre-sale of about 42 percent of their coin supply. According to the firm’s internal reporting, investors from 25 countries participated in the two rounds, contributing a total of 121,300 ETH.
“The original idea of the Ripio Credit Network was to widen financial inclusion by extending credit lending globally,” Serrano noted at the time in a press release. “The support, not only for our platform but for our mission, is truly inspirational and an unforgettable benchmark in the evolution of the lending infrastructure.”
And that infrastructure in which they are investing, noted Garcia, is critical to solving for the second major issue they face as they are working to build a global P2P lending platform: trust.
Because they are built off the blockchain, they are able to offer smart, easily accessible contracts with terms that are highly customizable for all parties – and that are built to “contain a borrower’s credit-risk history and identity assessment to be included on the blockchain.”
But beyond transparency due to that infrastructure, Garcia said that the Ripio platform also inserts a third party unique to their P2P design, the co-signer.
“Credit origination and default risk are handled by the co-signer, an external agent that protects the lender from risk as insurance in exchange for a premium,” Garcia said. “Lenders get paid by the RCN smart contract and, in case of default, the co-signer will pay the lender and collect the debt from the borrower. Co-signers are financial institutions with the ability to predict defaults and also enforce debt collection from the borrower. Lenders profit on the interest charged on the loan.”
The co-signer is one of the key agents of the Ripio Credit Network, according to Garcia, acting as a reinsurer that distributes and reduces the lender’s risk and helps to improve the contract conditions on the borrower’s side by retaining access to the borrower’s local legal system.
“The inclusion of a co-signer substantially reduces the loss in the whole network – not just the loss attributed to the cosigner himself, but also the loss sustained by the lender,” Garcia wrote in a blog post.
Ripio is new – very new. After going live in its home nation of Argentina and Brazil, it is currently working on building local partnerships to expand its services into Mexico, South Korea and Vietnam. Ripio is not alone in its pursuits: Denver-based SALT is working to create a similar business facilitating loans collateralized by bitcoin and other cryptocurrencies.
But Serrano remains confident that Ripio – and its starting grounds in a home country like Argentina, where its services are very much needed – has an advantage when it comes to building inclusion networks.
“In Argentina, you know for sure it [the peso] will lose value,” Serrano noted. “There is an outlook for bitcoin and other digital currency to appreciate – and that is pushing people in all kinds of markets to reconsider how lending can and should be done worldwide.”
He has a point. Just last week, the Argentinian peso traded at an all-time low against the dollar, prompting the central bank to raise its benchmark rate to 40 percent.
Ripio may have its best shot at proving its point – and its value – right now.
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