Naranja X: Expanding Credit Access Through Blockchain-Backed Collateral

In Argentina, a credit card is not a luxury — it's a gateway to online purchases, discounts of up to 30%, and interest-free installment plans of 12 to 18 months that are critical for managing household budgets in an inflationary economy. For the 3.5 million people rejected by Naranja X each year, being denied a credit card means paying more for everything.

The Challenge

Traditional credit scoring systems evaluate applicants based on historical financial behavior — previous loans, existing credit cards, bank account activity. For people without this history, the system produces a simple answer: rejected. This affects immigrants who arrived without local financial records, freelancers whose income doesn't fit employment templates, young people entering the workforce, and residents of rural areas far from bank branches.

The scale of the problem at Naranja X alone was significant: 3.5 million card applications rejected per year and 1.48 million credit limit increase requests denied. Across Argentina, 32% of the population applied for credit in 2022, and 43% of all credit operations occurred in the informal market — evidence that demand exists but the formal system fails to meet it.

Naranja X needed a solution that could approve these applicants without increasing default risk, while complying with regulatory requirements in a market where crypto-backed guarantees had no established legal framework.

The Solution

Xcapit designed and built a complete infrastructure enabling credit applicants to use stablecoins as digital collateral, locked in a decentralized smart contract that serves as an automated escrow.

User Flow

• Naranja X notifies rejected applicants about the alternative approval path via email
• The user accesses an informational landing page and creates a self-custodial wallet
• The user purchases USDC with Argentine pesos or transfers stablecoins they already hold
• With a single click, the user selects the amount to lock as collateral in the smart contract
• Within 24 hours, Naranja X confirms the collateral and issues the credit card
• Monthly payments proceed normally. Default triggers automatic collateral liquidation to the bank
• After months of consistent payments, the user builds credit history and can access traditional unsecured credit

Architecture & Design Principles

The solution was built on the Polygon blockchain network with smart contracts handling the escrow logic. Chainlink oracles provided external verification, and a dedicated API connected the smart contract system with Naranja X's internal approval workflow. A fiat-to-crypto onramp enabled users to purchase USDC directly with Argentine pesos.

Three design principles guided development:

• Self-custodial: Neither Xcapit nor Naranja X could access locked funds. Users controlled their collateral through private cryptographic keys, and the smart contract enforced release conditions automatically
• Dollar-denominated protection: Collateral held in USDC protected users against currency devaluation — during the pilot, the Argentine peso lost 80% of its value against the dollar, validating this design choice
• Regulatory compliance: Since crypto-backed guarantees lacked specific regulation in Argentina, the team worked with legal advisors to structure the arrangement within an existing viable legal framework

Results & Impact

Engagement Metrics

The email campaign that launched the pilot significantly outperformed industry benchmarks. The open rate reached 35% (vs. 26% industry average) and the click-through rate hit 9.18% (vs. 3.6% industry average). Of users who clicked through, 3.70% completed the full journey from collateral deposit to approved credit card.

Pilot Outcomes

Sixteen people obtained their first-ever credit card through the program. The average collateral deposit was 38 USDC (approximately 27,000 ARS at the time). Card activation within the first 30 days reached 81%, and 81% received physical card delivery. Spending analysis showed basic consumption — supermarkets, Mercado Libre, and everyday necessities — confirming the cards were used for genuine household needs, not speculative purchases.

User Profile

The pilot attracted a diverse user base that reflects the demographics most underserved by traditional credit scoring:

• 56% Argentine nationals, 44% foreigners with Argentine residency
• 44% employed, 25% self-employed, 19% students, 13% other
• 88% male, 12% female
• 81% under 37 years old
• 50% residing in mid-size or small cities
• 52% already held cryptocurrency and transferred it directly — higher adoption than expected

User Satisfaction

Satisfaction was universal: 100% rated their experience as good or very good, and 100% said they would recommend the solution, with an average recommendation score of 8.9 out of 10. When asked what they valued most, 50% highlighted that the solution doesn't require traditional credit approval, and 33% valued its accessibility regardless of background.

Testimonials

"It's my first credit card." — Marilina Rojas

"Between my sister, my mom, and me, we pooled the money to be able to get it." — Mat Honores

"No bank would give me a card because I'm from another country." — André Simoes

"I've lived in Argentina for 15 years and was never able to get one." — Carlos Quena

Challenges & Learnings

The pilot surfaced operational realities that shaped the product roadmap:

• Physical card delivery in rural areas was difficult — incomplete addresses, distances up to 200 km to the nearest branch, and unreliable postal services required hybrid solutions combining physical and digital cards
• Regulatory navigation required significant effort, as crypto-backed guarantees had no established legal precedent in Argentina
• Connectivity gaps in rural areas meant users often operated by moving from one WiFi access point to another, informing UX decisions for offline-capable flows
• The solution was iterated across two phases, incorporating learnings from initial user feedback into the second wave
• Cross-team integration between Xcapit's blockchain engineers and Naranja X's internal systems team was essential for seamless collateral verification and card issuance

Business Opportunity

The pilot validated a model with significant scaling potential. Naranja X's own projections, based on pilot conversion rates, outlined the following scenarios:

• New card applications: 3.5M rejections/year at 9% conversion = $23.5M in collateral deposits, generating $470,000 in setup fee revenue (2% commission)
• Credit limit increases: 1.48M rejections/year at 22% conversion = $14.5M in collateral deposits, generating $292,000 in fee revenue
• Combined collateral pool: $38M in total deposits
• Collateral execution revenue: $57,000/year (5% default rate on executed guarantees)
• Total projected annual revenue: $1.14M from a single issuer

These projections cover only one credit card issuer in one country. The model is replicable across any institution that rejects creditworthy applicants due to insufficient history — banks, fintechs, cooperatives, and mutual lending platforms across Latin America, Africa, and Southeast Asia.

Key Takeaways

• Blockchain-based stablecoin collateral eliminates default risk for issuers while opening credit access for previously rejected applicants
• Self-custodial design ensures neither the technology provider nor the bank can access user funds — trust is enforced by code
• Dollar-denominated collateral protects users in inflationary economies (validated by 80% peso devaluation during pilot)
• 100% user satisfaction and recommendation rates demonstrate genuine product-market fit
• The model works for real people with modest means — average deposit was just 38 USDC
• Significant scaling potential: $1.14M projected annual revenue from a single issuer

Want to explore alternative collateral solutions for your institution? Whether you're a bank dealing with high rejection rates, a fintech seeking new product lines, or a multilateral organization working on financial inclusion — Xcapit has the infrastructure, the experience, and the proven results. Let's talk.