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Wouldn't credit cards have this same problem? It seems like most online purchases are already instant-financed through credit cards, though credit approval is
by jcnnghm 14y ago
Wouldn't credit cards have this same problem? It seems like most online purchases are already instant-financed through credit cards, though credit approval is done in advance. Credit cards are unsecured and the whole system is largely based on the probability of the cardholder defaulting given their payment history. I don't see how this is different.
- jeremysmyth 14y agoDepends on your perspective. The vendor is covered by the credit card company, and gets paid, so doesn't need to know anything about the borrower. The credit card company doesn't want the borrower to default, so they do a certain amount of checking before pre-approving the card to minimize that possibility across their customers (and charge a premium across the board to ensure they're covered even if some defaulters get through). That's what I meant when I said "finance will be an expensive proposition for unknown borrowers"; they're not unknown (to the financer, i.e. the credit card company) if they have a credit card account.
- jcnnghm 14y agoNobody extends credit to "unknown borrowers". That's exactly why credit scores exist, which map 1-to-1 with the probability that a borrower will default prior to some horizon. This is a solved problem.