Let me explain what is a credit buffer and why do we want it.
A credit buffer is something like a current account overdraft facility or a credit card, a Curve card user could spend from the buffer under certain conditions and repay it latter. But it’s different than overdraft and credit card.
The difference between the buffer and an overdraft
The buffer is smaller and it has a interest free period. The buffer doesn’t offer thousands of pounds to user. The buffer also doesn’t charge for interest on the first a few days or weeks if used, but it can and will charge for interest if the borrowed money is not repaid within a reasonable amount of time.
The different between the buffer and a credit card
The buffer is (again) smaller, and it has shorter interest free period. But more importantly, Curve users cannot actively choose to spend from the buffer. The buffer can, and will only be used automatically if certain conditions are met. I will explain the conditions latter.
In addition to above, Curve users also cannot use the buffer for activities such as repaying a credit card, withdrawing cash, gambling, etc.
A comparison table that highlights the similarity and the differences
(*) User cannot choose to spend from the overdraft facility if the transaction does not bring the account to a negative balance
(**) Normally needs to be repaid before the end of the day to avoid fees and/or interest
Okay, now we know what the Curve credit buffer is, but why do we need it?
Well, as we all know that the Curve card is actually a proxy card, all transactions made on the Curve card will eventually end up on one of the backend cards behind the Curve card. The problem is the backend cards do not always work, the card issuer could have IT issues with their system, they might temporarily decline suspicious transactions until they could reach the user and confirm them. In reality, anything could happen between Curve and the backend card issuer, and result in either delays or declines.
When this happens to me, it is inconvenient and sometimes stressful and causes frustration. As a Curve user I would have to take my phone out, and then switch to a different backend card before retry the transaction. This is not a big deal if I was sitting on front of my screen and using my Curve card for online shopping. But it can be stressful if I was in a supermarket or shopping mall with tons of people waiting in the queue behind me.
I have had this kind of experiences a few times in the past years (I’m a Curve Beta user), and whenever it happens to me, I just wanted my Curve card could accept the transaction and then latter take the money from either the same card or ask me to choose a different card.
I fully understood that this is in fact a lending product and different regulations would have to apply to the product, but it is definitely doable. As an alternative, if the regulation is a road blocker, Curve could allow user to choose a failback card in case of declines, but I’m afraid that this won’t work in the event of first card issuer timed out, by that time it will be too late for Curve to start the fallback.
Financially, a small buffer of a few hundred pounds and only being used in rare cases (and controlled by Curve) is certainly affordable for Curve. In fact, if the user fails to repay in time, Curve can also charge for interest and/or fees for the use of credit buffer, which results in additional profit for Curve. This will be a win-win product for both Curve and it’s users.