Private credit, specifically asset-backed finance (ABF), represents one of the fastest-expanding segments in global finance. Currently valued at $6.1 trillion, Apollo Global Management estimates the total addressable market exceeds $20 trillion.
Despite its massive scale and increasing importance in funding businesses and consumers globally, the industry remains dependent on manual spreadsheet processes. This legacy approach results in bloated middle- and back-office operations, significant cash drag, and financing costs that are up to 30% higher than optimal levels.
The current system resembles tracking work hours on paper notes, mailing them, and waiting weeks for payment—an inefficient method unacceptable in modern finance.
These operational inefficiencies stem from how ABF is currently managed. Unlike corporate credit that relies on borrower balance sheets, ABF depends on contractual cash flows from underlying assets such as BNPL loans, supply chain receivables, and small business financing. Major funds like Apollo and Blackstone create customized facilities for originators to handle this complexity.
Originators typically generate thousands of monthly loan requests but face weekly drawdown cycles at best. Between cycles, capital remains idle, investors experience cash drag (return erosion from undeployed capital), and originators use expensive equity to bridge funding gaps.
Traditional managers employ large operational teams for covenant monitoring, collateral verification, and payment waterfall management—processes that are labor-intensive, error-prone, and costly.
The industry is undergoing a transformative shift accelerated by web3 technology and blockchain infrastructure.
This revolution centers on programmable money and blockchain-enabled infrastructure. New market entrants leverage programmable credit facilities and stablecoin rails to originate faster, fund cheaper, and scale efficiently. By tokenizing credit facilities and embedding smart contracts throughout the lifecycle, managers automate verification, ensure real-time compliance, and enable instant drawdowns and repayments.
Platforms like Fence and Intain demonstrate practical applications—managing origination, reporting, and payment waterfalls through code. When combined with programmable stablecoins for funding and settlement, originators eliminate cash drag entirely.
Source: Fence.Finance
The implications are significant: large managers like Apollo and Blackstone reduce operational overhead, while smaller funds and family offices gain access without massive staffing requirements. On-chain infrastructure democratizes participation in a market historically dominated by large institutions. Traditional players relying on manual processes risk losing ground to specialized credit funds adopting blockchain technology.
With renewed crypto enthusiasm and growing stablecoin adoption, ABF is leveraging blockchain to solve real operational challenges and capture expanding market opportunities. This space warrants close attention.