Programmable Credit

Programmable credit is a loosely used term for borrowing arrangements whose rules are written into software so that they execute automatically, rather than being checked by a lender's staff. A line of credit might, for example, release funds only to approved suppliers, raise or lower its limit as a business's sales data changes, or sweep repayments directly from incoming payments. On blockchains, the same idea appears in smart contract lending, including arrangements in which one user delegates borrowing power to another under set conditions, and in on-chain credit pools that finance receivables, such as PayFi products. Supporters say it can cut costs and widen access to credit. Critics note that automated rules cannot judge unusual circumstances, that code can contain errors, and that consumer lending protections still apply however a loan is delivered. The term has no fixed industry definition. Also see programmability.