Phase 2: Automate Repayment
Status: Future Timeline: 2026-2027 Prerequisites: Phase 1 validated (pools active, cashflow underwriting working, sufficient scale)
What We're Building
Phase 2 automates loan repayment, removing all manual repayment friction.
The vision: Loans that repay themselves automatically from your income.
Two mechanisms:
Wallet auto-deduction — Deduct % of incoming crypto transfers automatically
Merchant revenue sharing — Deduct % of daily sales automatically
Goal: Significantly reduce defaults by eliminating manual repayment friction.
Why This Matters
The problem: Borrowers forget to pay. Not because they can't afford it—they just forget.
→ Borrower forgets → Late payment → Default
The solution: Set it once, forget it. Money automatically deducts from your income.
→ Income arrives → Auto-deduct → On-time payment
For borrowers:
Never worry about due dates
Never open the app to make payments
Never default from forgetfulness
For merchants:
Bad sales day? Smaller payment. Good day? Pays off faster.
For lenders:
No chasing late payments
Predictable yield, lower defaults
How It Works
Wallet Auto-Deduction (for crypto earners)
Example: DAO pays you $2,000 USDC → Plugin deducts 10% ($200) → Sent to loan → You keep $1,800
Smart wallet plugin deducts a % of incoming stablecoins automatically. Safety controls: minimum threshold, monthly cap, pause button.
Merchant Auto-Deduction (for small businesses)
Example: Daily sales $1,000 → System deducts 5% ($50) → Sent to loan → You keep $950
Connect Square/Shopify account, choose daily rate. Bad sales day = smaller payment. Good day = pays off faster.
Why merchants choose this: 12% APR vs. 280% APR (MCAs)[54][55][56], transparent pricing, prepay without penalty.
Implementation: Square first (open API), then Shopify (waiting for crypto features).
Technology Dependencies
ERC-4337 smart wallets: Early adoption today, needs payment stream standards (2026-2027).
Merchant rails: Square API ready now, Shopify waiting for crypto features.
Beyond Phase 2
Once auto-repayment works, LendFriend becomes lending infrastructure: portable on-chain credit scores, institutional liquidity at wholesale rates, multi-platform/currency/region expansion. End game: uncollateralized lending becomes a DeFi primitive.
Last updated