Swiss cross-border payments network Arf has launched Arf Credit, a product designed to provide instant working capital credit lines for money service businesses (MSBs).
“Traditionally, when a money service business wants to send money from one country to another, it has to pre-fund the same amount in the receiving country, bringing about tied capital, high opportunity cost, and operational inefficiencies,” Arf said in a news release Thursday (April 7.) “What’s more, since cross-border transactions are often considered risky, access to credit has always been a major problem for MSBs.”
The company said the idea for the credit product came about when its founders noticed that most MSBs had to deal with steep pre-funding requirements and limited access to capital.
“The real problem with the current cross-border payments industry is that when you’re successful as an MSB, you need more money to run it,” said Co-founder and CEO Ali Erhat Nalbant. “We developed Arf Credit as an API-based, transactional short-term working capital in USDC so that MSBs can use stablecoins without prefunding.”
While options existed, Arf argued most lenders stuck to customers with long-term credit needs or single payout corridors. Meanwhile, MSBs were faced with long application processes, and once the credit was given, it had to be paid back whether or not it was used.
With Arf’s offering, licensed MSBs can instantly get the credit with a 2-7 day repayment period, said Co-founder Berhan Kongel.
“Each eligible MSB is assigned a certain amount of credit based on its transactional volumes within the Arf Network,” Kongel said. “They only pay interest for the credit amount used, and can automate repayments.”
Last year, Arf joined forces with European money service Tempo Payments to launch a payment corridor through the Stellar network, from Europe to the Philippines.
Stellar USDC is a digital currency issued by Circle and forms the backbone of the collaboration, which involves Tempo accepting fiat euros from senders and converting them to Stellar USDC. From there, Arf moves the money to a Filipino partner to be changed to local fiat.