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Brainstorm Solutions: How to Prevent Buyers/Sellers from Regressing to Informal Credit?
A startup partnered with an NBFC to formalize informal trade credit between sellers and buyers. Initially, 8,000 sellers and 39,000 buyers engaged in peer-to-peer trust based credit: sellers extended informal credit on sales to buyers, creating trust but lacking structure.
The Intervention:
The startup introduced a platform where:
Sellers received instant payment for goods/services.
Buyers gained access to a 30-day interest-free credit period. The model prioritized onboarding sellers first (due to the instant payment incentive), with buyers joining through seller
The Unintended Consequence:
Over time, buyers preferred transacting with sellers who still offered informal credit outside the platform. Sellers reliant on the platform began losing business, forcing many to revert to informal credit to retain buyers. This led to a systemic shift back to unstructured lending, eroding the platform s value.
