Platform Risk

The risk that the intermediary arranging or servicing investments fails, is poorly run or acts improperly, harming investors regardless of the underlying assets.

Example

A lending platform enters administration and repayments to investors are delayed for years.

Important

Check how client money is held and what wind-down arrangements exist before investing.

Related terms

• Counterparty risk — The risk that the party on the other side of an arrangement fails to pay what it owes you.
• Peer-to-Peer Lending — Lending to individuals or small businesses through an online platform that matches lenders with borrowers.

Lessons that explain it

• You are the lender, so you inherit the lender's worst day — Private credit means lending money outside public bond markets - to companies, property projects or individuals - usually directly or through a platform or fund, with no easy way to sell the loan. (9 min)
• Appraising one loan: what backs it, how thin the cushion is, and who collects — Evaluating a loan means asking how the borrower repays, what happens if they cannot, how far collateral could fall before you lose money, and how reliable the lender or platform is at recovery. (13 min)
• Defaults cluster, exits close, and interest is often taxed as income — The key risks are defaults rising together in a downturn, being unable to exit, and intermediary failure. Costs include layered fees, and interest is frequently taxed less favourably than gains. (12 min)
• An AI product's margin and moat depend on what it does not own — Companies built on AI models carry specific risks: dependence on model providers, inference costs that grow with usage, rights to training data and outputs that are hard to evaluate. Diligence tests each. (11 min)

All 578 terms in the Investing glossary