Written by: Liam Akiba Wright
Compiled by: Chopper, Foresight News
Every credit card payment creates a timing mismatch problem for the company behind it. Card issuers often have to pay Visa daily for settlement before customer funds arrive, leaving a brief but recurring funding gap.
On September 8, Visa announced the launch of an on-chain lending program aimed at filling this gap. Credit Coop is an on-chain credit protocol offering stablecoin revolving credit lines: institutions use it to advance settlement payments, and subsequent cardholder repayments automatically flow back to repay the advance.
This design brings traditional accounts receivable financing onto the blockchain. Smart contracts automatically handle withdrawals, fund flows, and repayments; while authorized Visa settlement files remain the core determining factors for "how much can be borrowed and on what basis." The result is a hybrid credit market: execution is more transparent on-chain, but the decisive commercial data and risk terms remain held by authorized parties, not publicly disclosed.
Settlement Gap Becomes Collateral
Stablecoin-linked credit card projects must pay according to Visa's settlement schedule, regardless of cardholder repayment rhythms. This misalignment is particularly challenging for emerging projects: transaction volume grows rapidly, but their access to bank credit or financing secured by accounts receivable fails to keep up, widening the gap.
Visa indicates that such funding needs are growing alongside stablecoin business. The company reported over 160 stablecoin-linked credit card programs in Q2 FY2026, with payment volume surging nearly 200% year-over-year; stablecoin settlement volumes recently crossed an annualized rate of $20 billion, over 15 times the figure from the same period last year.
Each metric measures a different aspect of the business. The number of programs reflects network coverage, payment volume growth rates reflect card transaction activity, settlement run rates are annualized recent cash flows, and Credit Coop's outstanding loan principal is another independent metric. Taken together, however, these indicators point to the same conclusion: an increasing number of programs may need short-term funding collateralized by settlement receivables to bridge the gap.
According to Visa, participating institutions draw from the stablecoin revolving credit line to fulfill daily settlement obligations, with funds flowing directly to Visa's settlement address. Subsequently, cardholder repayments first flow through Credit Coop's Spigot contract—a programmable lockbox: upon receipt, funds automatically pay interest and replenish the credit line before the remainder enters the borrower's operating account.
Visa describes this model as "secured solely by settlement receivables," a fundamental distinction from common DeFi structures: in DeFi, borrowers typically pledge cryptocurrency worth more than the loan itself; here, lending is backed by future payment flows from cardholders.
Each drawdown and repayment is recorded on-chain, leaving timestamps, token flows, and contract execution history. Visa states that Credit Coop has processed over 3,000 drawdown events and 9,000 repayment events across participating credit arrangements.
Visa internally maintains a second layer of evidence. Visa says Credit Coop receives daily authorized settlement files for each program via secure channels, then combines these records with on-chain history to determine funding amounts, validate disbursements, and track repayments. Public transaction data records token movements, while Visa's data stream links these movements to specific settlement obligations and program performance metrics.
This grants Visa a broader role. Its infrastructure bridges the timing gap, and its records help lenders decide how much funding is needed to cover it.
Track Record: Large, Concentrated, and Self-Reported
Visa states that the Credit Coop model has cumulatively funded over $2.5 billion in settlement volume since 2023 with zero defaults. The company also says increased lender participation has reduced borrowing costs for participants by up to 30%.
Both claims warrant careful consideration. Cumulative funded settlement volume measures the turnover capability of the revolving credit line. The same funds can be loaned, repaid, and reused, so the $2.5 billion figure alone does not indicate the outstanding principal or risk capital on any given day, nor should it be interpreted as Credit Coop's revenue, total credit card spend, or market share.
The data's source is equally important. Visa's accompanying notes state data is provided by Credit Coop, with on-chain event counts as of August 19, 2026, and add that the zero-default status should be reconfirmed prior to publication. Regarding the borrowing cost reduction claim, Visa did not provide specific financing rates, sample sizes, or calculation methods.
Payment company Rain, a Visa principal member, accounts for the majority of disclosed activity. Visa says Rain has used Credit Coop's revolving credit line since August 2023, and as of August 19, has settled approximately $2 billion cumulatively through over 2,000 draws and 7,000 repayments.
Repeated draws and repayments over three years indicate an operational system with real usage, but existing data offers limited insight into credit risk profiles. Initial credit limits, current exposure, lender concentration, and performance through loss cycles are not within disclosed scope.
Karta's experience shows how far Visa believes this model can go. Visa states Karta initially used Credit Coop for launch and expansion, later switching to a larger institutional credit line.
Karta's own June announcement confirmed the latter, larger funding: a $140 million financing round led by Galaxy Ventures and Community Investment Management (CIM). However, this announcement made no mention of Credit Coop—so the claim that "Karta's early growth relied on on-chain financing" currently rests solely on Visa's word.
This sequence highlights a potential role for on-chain credit: smaller-scale projects can initially use on-chain funds for repeated draws and repayments to build an operational track record, then seek traditional institutional financing after scaling. Thus, blockchain-based credit acts more as a stepping stone to private credit rather than a replacement.
Programmable Priority Still Faces Loss Risk
Credit Coop's documentation states that a credit arrangement can involve multiple lenders, with priority repayment rights assigned to them via the cash flows controlled by the Spigot contract. The contract enforces pre-set fund flow paths.
Credit Coop's technical materials also highlight personnel and software dependencies surrounding this promise. The protocol grants significant powers to arbiters and Spigot owners. Its edge-case documentation describes possible revenue contract changes, cash flow diversion, malicious control, and complexities in post-default execution. These are design-level risks, with no indication they have occurred in Visa-linked arrangements.
The specific legal protections for each credit arrangement remain out of view. Public disclosure does not list every lender behind the Visa-linked program, does not provide the complete waterfall order determining loss allocation, and does not answer questions such as: whether borrowers provide first-loss equity or reserves; whether guarantees or insurance exist; and to what extent lenders' recourse extends when controlled receivables are insufficient.
A programmable lockbox enhances lender control over incoming value, but it cannot create value or route funds that never enter the controlled path when customers default or receivables are disputed. Any resulting losses will depend on protections and contractual rights Visa and Credit Coop have not publicly detailed.
This boundary more clearly defines the nature of this experiment than the "on-chain lending" label. The useful product is a prioritized claim on payment flows, serviced at blockchain speed and underpinned by Visa's records. Public chains provide execution evidence, while Visa's data and credit contracts determine the extent to which this evidence reflects credit quality.
For on-chain credit, this is a product with significant market potential, as it addresses the recurring funding need arising from credit card settlement. It also reinforces Visa's market position: the network provides channels, crucial credit assessment data, and the contextual information needed to transform token transfers into credit signals.
