Trillion-Dollar Consumer Loan Market: Key Players Missing

The consumer loan vault of the public chain project Pharos reached its deposit cap of $50 million within 48 hours of its launch this year, with approximately $35 million in committed deposits at the official start.

More notably, Pharos is not an isolated case. Over the past few years, several projects have emerged on-chain attempting to bring consumer loans, inclusive finance, and housing loans onto the blockchain. They are not targeting a newly created asset class but rather a traditional market that has long existed but has not been fully brought on-chain—global consumer credit.

A Trillion-Dollar Cake, No One to Cut It

Consumer credit is not a niche asset: According to Euromonitor, the global consumer credit market is expected to exceed $21 trillion by 2025 and reach $25.5 trillion by 2030. Compared to this scale, on-chain consumer credit is still an early-stage market. There are not many teams that have successfully standardized consumer loans as on-chain products and formed a certain scale.

This precisely explains why Pharos's consumer loan vault, with a scale of several tens of millions of dollars, is worth attention: it is not opening a new DeFi lending pool but tapping into a traditional financial market that is massive but has a very low on-chain penetration rate.

In the past, the easiest real-world assets (RWA) to bring on-chain were standardized assets like U.S. Treasury bonds and money market funds, as they have low credit risk, transparent valuations, and mature legal structures. Consumer loans, however, are entirely different: they consist of small loan amounts, dispersed borrowers, varying terms, and more complex underlying credit risks.

Thus, the real difficulty in bringing consumer loans on-chain has never been about "how to turn loans into on-chain products," but rather how to repackage thousands of offline loans into standardized credit products that on-chain capital is willing to buy.

On-Chain Changes the Distribution of Funds

Compared to traditional consumer loan asset-backed securities (ABS), on-chain products indeed change some aspects of the flow of funds.

First, the settlement path has changed. Investors can participate in subscriptions and redemptions using stablecoins, and funds do not have to rely entirely on traditional cross-border wire transfers, custody, and settlement systems. For global capital, this can reduce some account systems and cross-border settlement steps.

Second, the presentation of asset information has changed. On-chain shares, transaction records, and some asset data can be continuously updated through smart contracts and product interfaces, shortening the path for investors to obtain information and making it easier for programmatic verification.

Third, the settlement method of shares has changed. Standards like ERC-7540 for asynchronous vaults are designed for real assets and private credit that cannot be settled instantly: investors first submit subscription or redemption requests, and after the vault processes them, they receive shares or assets. This addresses the mismatch between the settlement cycles of on-chain shares and underlying assets.

These differences address issues of fund distribution and operational efficiency, not credit risk—the underlying loans still carry the same bad debt risks. However, for consumer finance institutions, the value lies here: they do not need to reinvent a lending system but gain an additional channel to access global digital asset funds.

Several Paths Are Converging

Several projects that have emerged, although differing in assets and models, generally follow a similar logic: emerging market consumer loan rates are high (commonly ranging from 11% to 30%), and traditional funding channels are limited; on-chain capital also wants to escape the increasingly thin yields of Treasury-like RWAs, leading to a perfect match.

• Pharos: Connecting small consumer loans across Mexico, Thailand, Indonesia, Pakistan, and the Philippines, utilizing the on-chain vault infrastructure R25 and risk curation agency Axil to create a 92-day term on-chain product, targeting an annualized return of 13%, with an on-chain scale of approximately $35 million. The product uses USDC as the settlement asset, aiming to allow global on-chain capital to access consumer credit exposure previously mainly undertaken by local financial institutions and private credit funds.

• Huma Finance × Tala: On the public chain Solana, they have created "PayFi" by combining cross-border payment financing and emerging market consumer credit, with Tala planning to deploy a $50 million stablecoin USDC credit line to serve its inclusive finance clients globally.

• Figure: The U.S. licensed consumer credit company Figure has cumulatively initiated over $21 billion in home equity loans through its self-built public chain Provenance; Figure's latest securitization transaction has received AAA ratings from S&P and Moody's. Figure positions itself as a capital market infrastructure connecting loan origination, funding, and secondary market trading, rather than merely moving loans on-chain. This is also the most significant distinction between Figure and the previous projects: it is not just placing assets on-chain but attempting to connect asset origination, capital markets, securitization, and distribution altogether.

• Goldfinch: Once a pioneer protocol for unsecured loans in emerging markets, it has cumulatively lent over $100 million but faced issues with borrower fund misappropriation and repayment failures, resulting in approximately $18 million in bad debts, leading to a community vote for liquidation in June this year.

Breaking it down, the underlying assets are in emerging markets or subprime borrower groups, while on-chain is responsible for fund entry and share records—the middle layer of professional packaging is where only one of these projects has truly adhered to traditional financial rules.

Goldfinch's experience illustrates that on-chain transparency cannot replace offline credit capability. The long-term viability of consumer loan products still hinges on borrower selection, risk pricing, post-loan monitoring, legal recourse, and default handling.

So, on the surface, these projects all seem to be "moving consumer loans on-chain"; however, when examined closely, they are actually trying to fill in the gaps across different stages.

What is truly scarce is precisely that middle layer.

What Is Truly Missing?

Breaking down this value chain reveals four layers:

The first layer is the underlying assets. Consumer finance institutions are responsible for finding borrowers, issuing loans, and completing post-loan management.

The second layer is credit and structuring. Someone needs to filter and combine large amounts of loans by term, credit grade, region, and risk, then design structures such as funds, SPVs, tranching, and credit enhancement, while coordinating ratings, legal documents, and subsequent distribution.

The third layer is on-chain infrastructure. Vaults, on-chain shares, NAV, subscription and redemption mechanisms, custody, and on-chain records move already structured assets onto the blockchain.

The fourth layer is the funding side. Stablecoin funds, crypto asset management institutions, family offices, and other digital asset investors provide funding for these products.

Currently, the most visible layer is the third.

However, what often determines whether a consumer loan RWA can scale from tens of millions to a larger scale is usually the second layer.

In traditional finance, this layer belongs to the securitization and underwriting system. When consumer finance institutions issue ABS, someone needs to design the transaction structure, arrange tranching and credit enhancement, and coordinate rating agencies, law firms, custodians, and institutional investors. This system has been in operation for decades.

Many on-chain consumer loan projects, however, have Web3 teams taking on a significant portion of this work themselves: filtering assets, designing vaults, conducting risk curation, determining yield structures, and directly selling products to on-chain capital.

The issue is that while this model can scale quickly, it may not be sufficient to support institutional-level scale.

R25 and Axil behind Pharos essentially undertake part of the asset filtering, risk curation, product structure design, and capital raising work found in traditional securitization transactions. However, compared to the mature ABS market, it is still challenging to find sufficiently complete performance data by country and batch, as well as independent ratings, standardized credit enhancements, and comprehensive default handling mechanisms in publicly available materials.

This is not to say that on-chain products are inherently unsafe, but rather that while on-chain has resolved the "how assets flow" issue, it has not yet fully addressed the "why assets are worth buying" question.

The significance of Figure lies here.

It does not bypass traditional finance but brings the most crucial credit language of traditional finance onto the blockchain. Figure has already received AAA ratings from S&P and Moody's, and its latest securitization transaction is claimed by Figure to be the first to receive this dual AAA recognition in the blockchain finance sector.

In other words, what Figure proves is not that "blockchain can do loans." What it truly demonstrates is that when on-chain assets possess standardized loan data, securitization structures, ratings, and institutional-level capital market infrastructure, traditional financial capital can also understand and allocate these assets in familiar ways.

Goldfinch, conversely, illustrates the same issue from the opposite perspective: without a mature credit filtering, ongoing management, and recovery system, even the most efficient on-chain capital entry cannot replace credit capability.

How Much Is It Worth to Be One Step Ahead?

Looking at the problem in reverse: if what is truly missing in this value chain is structuring and distribution capability, then institutions that first fill this gap will gain more than just a single business.

First, the market is still early enough.

As mentioned earlier, the global consumer credit market is already a mature asset market exceeding $20 trillion, but there are still very few products that have been standardized and institutionalized to enter the on-chain capital market. This means that the market has not yet formed mature product standards, pricing systems, and service chains, and early entrants still have the opportunity to establish their positions.

Second, this is about finding new money for existing assets.

What consumer finance institutions typically lack is not lending capability but a continuous, stable, and cost-effective source of funds. On-chain stablecoin pools provide a batch of digital asset funds that are difficult to reach through traditional bond markets.

If this channel can be successfully established, consumer finance institutions do not need to abandon their existing bank, ABS, and institutional funding; they only need to add a new funding pool outside their existing financing structure.

Third, what is precisely lacking is mature capital market capability.

Currently, the common shortcomings in on-chain consumer loans—insufficient asset disclosure and independent auditing, the lack of widespread rating and credit enhancement mechanisms, and the absence of unified market standards for legal rights confirmation and default handling—correspond to some of the most mature segments of traditional capital markets.

Asset securitization, structured financing, credit analysis, rating coordination, and institutional distribution are capabilities that have been running in the traditional ABS market for many years; what on-chain consumer loans truly lack is not the need to reinvent a set of capabilities but to transfer this mature capability to new funding channels.

Figure has already proven that on-chain assets do not exclude traditional financial rating and securitization systems. As stablecoin funding and the RWA market continue to expand, the value of this layer of capability will only become more apparent.

Who Will Sit at the Table First?

The real competition for consumer loans on-chain may never be about "who issues an RWA vault first."

Pharos has already demonstrated that on-chain capital is willing to provide tens of millions of dollars for emerging market consumer credit; Tala and Huma Finance have proven that stablecoins can enter consumer finance systems serving underbanked populations globally; Figure further demonstrates that when on-chain assets possess mature capital market structures and rating systems, they can also enter familiar allocation frameworks for traditional institutions.

These paths all point to the same question: who can transform dispersed consumer loans into a standardized, priceable, rateable, and distributable on-chain credit asset?

Consumer finance institutions hold the assets and risk control, Web3 teams provide the on-chain infrastructure, while the structured, credit analysis, rating, and distribution capabilities accumulated over many years in traditional capital markets can precisely fill the most lacking link between the two.

Compared to highly standardized assets like Treasury bonds and money market funds, the challenge of consumer loans is not just moving assets on-chain but reorganizing the dispersed underlying loans into standardized products that institutional investors can understand, price, and allocate before going on-chain.

This is precisely the incremental value of consumer loan RWAs that is currently most worthy of attention: on-chain infrastructure is gradually maturing, but the professional capital market capabilities that connect the asset side with institutional funding still have significant room for improvement.

This article is for reference only and does not constitute any investment advice. The market is risky, and investments should be made cautiously.