In the global chain of personal consumer credit, borrowers often resemble gently corralled sheep—accustomed to convenience yet lacking sharp awareness of interest rates and terms. Undoubtedly, this is a lucrative market. As unsecured consumer credit gradually migrates to the stablecoin track, its operational mechanisms will undergo fundamental changes, and new "shepherds" also have the opportunity to share a substantial portion of the profits during this transition.

The uniqueness of stablecoins lies in their position at the intersection of three massive markets: payments, lending, and capital markets. While we compete fiercely in the "red ocean" of stablecoin payments and await the continuous普及 of stablecoin market education, perhaps we can turn our gaze to the financial lending sector. Because, whether for capturing value from market spreads or reconstructing the entire value chain, this might be the most straightforward and impactful market.

1. The Market is Vast Enough
   According to data from the New York Fed in 2023, the outstanding balance of unsecured personal loans has reached $232 billion, an increase of $40 billion from 2022 and a surge of $86 billion from 2021, indicating strong market demand for this type of credit. Between 2021 and 2023, loan originations to subprime and below borrowers continued to grow, with fintech platforms being the core force driving this expansion.

   The increased awareness of unsecured personal loans among the younger generation is significantly driving global market expansion. Many young people face financial instability due to student loans, rising living costs, and other factors, making high-interest personal loans, short-term cash advances, and other payday products a "quick fix" to alleviate financial pressure. The ease of application, minimal requirements, fast funding, and unrestricted use make payday loans highly attractive and convenient tools. Simultaneously, rising penetration among younger customer segments and the continuous influx of new lenders further accelerate market growth.

   Despite a challenging macroeconomic environment, the unsecured personal loan market continues to hit record highs with no signs of slowing down. According to an industry report released by TransUnion in May 2025, as of Q1 2025, the unsecured personal loan market size reached $253 billion, with a total of 29.8 million loans. Currently, 24.6 million people in the US hold unsecured personal loans, with an average debt of $11,600 per borrower.

   In the United States, the mainstream form of unsecured borrowing is credit cards: a ubiquitous, highly liquid, instantly accessible credit tool that allows consumers to borrow without providing collateral at the point of purchase. Outstanding credit card debt continues to grow, currently standing at approximately $1.21 trillion.

2. The Essence of Finance Remains, But Technology is Evolving
   What is the essence of finance? It is the term mismatch of value across time and space. This essence remains unchanged for millennia. But the methods of service are changing: the "origin" of personal consumer credit lies in ancient credit arrangements, but it was installment payments in the early 20th century that truly shaped it into "dedicated money for ordinary people to buy things." Subsequently, credit cards merged "buying" and "borrowing" into a single piece of plastic, followed by mobile internet breaking down credit lines into second-level micro-loans. Each technological upgrade lowers the barrier to borrowing, fragments the scenarios further, speeds up risk control, and also pushes interest rates to find a new equilibrium between competition and regulation.

   The new finance based on blockchain can significantly enhance financial efficiency, realizing an on-chain financial world that transcends time, space, and asset categories.

   Stablecoins and on-chain credit protocols bring a new foundation: programmable money, transparent markets, and real-time fund flows. The combination of these three might finally break the old cycle and reimagine how credit is originated, financed, and repaid in a digital, borderless economy.

   The last major transformation in credit card lending occurred in the 1990s when Capital One introduced risk-based pricing, a breakthrough that reshaped the consumer credit landscape. Since then, despite the emergence of new digital banks and fintech companies, the fundamental structure of the credit card industry has remained largely unchanged.

   Here is a real-time case of financing credit card receivables through tokenization:

   In today's bank card payment system, there is a time gap between transaction authorization (i.e., the transaction is approved) and settlement (i.e., the issuer transfers funds to the merchant via the card network). By moving the financing process on-chain, these receivables can be tokenized and financed in real-time.

   Imagine a consumer makes a $5,000 purchase. The transaction is authorized instantly. Before settlement with Visa or Mastercard, the issuer tokenizes this receivable on-chain and obtains $5,000 USDC financing from a decentralized credit pool. When settlement occurs, the issuer transfers these funds to the merchant.

   Later, when the borrower repays, the repayment funds automatically flow back to the lenders on-chain via smart contracts—also in real-time.

   This approach achieves real-time liquidity, transparent financing, and automatic repayment, reduces counterparty risk, and eliminates the manual processes still heavily relied upon in today's consumer credit.

   This is also the fundamental logic behind Visa's recent announcement of its Visa Direct service launching stablecoin-based receivables advance financing business.

3. From Asset Securitization to On-Chain Lending Pools
   For decades, the consumer credit market has relied on deposits and securitization to achieve large-scale lending. Banks and issuers bundle thousands of receivables into Asset-Backed Securities (ABS) and sell them to institutional investors. This structure provides deep liquidity but also introduces complexity and opacity.

   "Buy Now, Pay Later" (BNPL) platforms like Affirm and Afterpay have demonstrated the evolution of credit assessment. Instead of granting a universal credit line, they perform separate assessments at the time of each transaction—treating a $10,000 sofa differently from a $200 pair of sneakers.

   This transaction-level credit assessment generates discrete, standardized receivables, each with a clear borrower, term, and risk profile, making them highly suitable for real-time financing through on-chain lending pools.

   On-chain credit can extend this concept further, allowing specialized credit pools designed around specific borrower profiles or consumption categories. For example, one pool might focus on financing small transactions for prime borrowers, while another focuses on travel installment services for near-prime consumers.

   Over time, these pools could evolve into highly segmented credit markets with dynamic pricing and transparent performance metrics, viewable by all participants in real-time.

   This programmability paves the way for more efficient capital allocation, better borrowing rates, and an open, transparent, instantly auditable global unsecured consumer credit market.

4. The Emerging On-Chain Credit Stack
   Reimagining unsecured lending for the on-chain era is not simply about "porting" credit products onto the blockchain; it requires rebuilding the entire credit infrastructure from scratch. Beyond issuers and payment processors, the traditional lending ecosystem relies on a complex series of intermediaries:

   New credit scoring methods are needed. Traditional FICO and VantageScore could be put on-chain, but decentralized identity and reputation systems might play a larger role.

   Lenders also need credibility assessment—on-chain rating mechanisms similar to S&P, Moody's, or Fitch—to evaluate credit quality and loan performance.

   The less glamorous yet crucial part of lending—collections—must also evolve. Debt denominated in stablecoins still requires enforcement mechanisms and recovery processes, necessitating the integration of on-chain automation with off-chain legal frameworks.

   Overall, blockchain and stablecoins cannot change the business nature and risk coefficients of personal consumer credit; credit rating mechanisms, risk control models, and legal frameworks are all indispensable. However, envisioning the future, we can use this new on-chain credit stack to achieve global distribution of personal consumer credit, access global capital liquidity, realize more efficient capital allocation, better borrowing rates, and more.

5. Final Thoughts
   Stablecoin credit cards have already built a bridge between fiat currency and on-chain consumption; lending protocols and tokenized money market funds have redefined savings and yield; introducing unsecured credit on-chain completes the loop—allowing consumers to borrow seamlessly and enabling investors to fund credit transparently, all driven by open blockchain financial infrastructure.