This is the risk of loss resulting from a borrower’s failure to meet its repayment obligations when they become due. Credit risk is reduced by focusing on cross-border payment providers (which by their nature tend to be large and well-capitalized). Furthermore, these cross-border payment providers are subject to rigorous credit checks as part of its onboarding process and have a maximum credit limit to control risk exposure.
Lender’s assets are aggregated together into a liquidity pool which is then accessed by borrowers. Therefore, credit risk is diversified, as lenders are not exposed to one borrower, but to all borrowers as a collective.