Visa Unveils On-Chain Credit Solution to Bridge Card Settlement Funding Gaps
Visa has rolled out an innovative credit program leveraging blockchain smart contracts to address the timing delays inherent in traditional credit card payment settlements. The initiative uses Credit Coop’s protocol to offer revolving lines of credit denominated in stablecoins, designed to finance daily settlement obligations while automating fund flows and repayments through smart contracts.
Card Settlement Timing Creates Demand for New Financing Approach
In credit card payment systems, card issuers must advance settlement funds to Visa before the cardholder payments are fully processed. This lag creates short-term liquidity gaps for merchants. Visa highlighted that as stablecoin-backed card programs and transaction volumes continue to increase, the need for such financing facilities has grown substantially. By the second quarter of fiscal 2026, more than 160 stablecoin-based card programs were active on Visa’s platform, with transaction volumes nearly doubling year-over-year to a $20 billion annualized settlement scale.
Visa’s on-chain financing relies on Credit Coop’s revolving stablecoin credit lines, allowing projects to draw funds as needed to meet settlement commitments. Funds first flow into Visa’s settlement accounts and are subsequently recovered from incoming cardholder payments via smart contract-managed escrow structures known as "Spigots." This mechanism transforms settlements receivables into secured assets, replacing the conventional overcollateralization typical in decentralized finance (DeFi).
More Than $2.5 Billion Funded with Consistent Performance
Since 2023, Visa revealed that over $2.5 billion in settlement transactions have been financed through Credit Coop’s on-chain credit model, with no defaults recorded to date. The company noted that expanded lender participation has driven average financing costs down by approximately 30%. It emphasized that the reported financing volume reflects the cumulative funds cycled through the system, rather than outstanding principal or overall card transaction values. Details on loan rates and loss-sharing arrangements remain confidential.
Among Visa’s partners, Middle Eastern crypto payment provider Rain has utilized this credit facility since August 2023, facilitating nearly $2 billion in settlement financing through more than 9,000 on-chain borrowing and repayment events. Visa also cited U.S. startup card issuer Karta, demonstrating how the blockchain finance solution aided its growth and smooth onboarding of traditional institutional capital.
Smart Contracts Enhance Transparency Amid Limited Disclosure on Legal Frameworks
The Credit Coop protocol supports multiple lenders with prioritized automatic repayments, while smart contracts record all borrowing and repayment transactions, enhancing traceability of fund movements. Nonetheless, risk management still depends on arbitration entities and contract custodians. Visa has not publicly disclosed lender identities, credit limits, or detailed loss absorption mechanisms, and relevant legal agreements remain nonpublic, likely involving limitations on lender rights and collateral responsibilities.
Visa’s approach effectively integrates traditional credit card settlement financing with blockchain verification of loans and repayments, complemented by Visa’s proprietary settlement data to improve risk assessment. This provides transparent execution records for lenders and borrowers. Rather than purely decentralized lending, the model fuses on-chain processes with traditional underwriting data, reinforcing licensed payment networks’ evolving role in financial infrastructure innovation.