When Trust Fails in Private Credit: Why Data Connectivity Is the Next Frontier for Risk Management

Private credit has been the defining growth story of modern finance. As traditional banks retrenched, private lenders filled the void — moving fast, structuring flexibly, and promising superior yields.

But as the Wall Street Journal recently reported, even the most sophisticated players are discovering the limits of trust.

Several institutional private credit funds are now facing hundreds of millions in potential losses tied to businesses accused of falsifying receivables and customer data. The allegations are staggering in their simplicity: fake invoices, fabricated email domains, and entirely invented customers.

Less a failure of judgement, this signals a failure of visibility.

The Private Credit Paradox: Growth Outpacing Governance

The private credit market now exceeds $2 trillion globally — and its rapid expansion has outpaced the infrastructure that underpins it.

Many lenders still rely on static financial statements, manual audits, and borrower-provided documentation as their primary verification tools.

That model works when relationships are small and localized. It breaks down when portfolios stretch across dozens of industries, tens of borrowers, and billions in deployed capital.

Private credit’s promise — flexibility, speed, bespoke structuring — has come with a tradeoff: less transparency and fewer standardized data practices. In other words, the system scales faster than its visibility.

When the Numbers Lie

The recent fraud cases are reminders that trust without verification is risk mispriced.

Fictitious receivables. Companies can easily fabricate customer invoices without real cash flows behind them.
Spoofed domains and digital identities. A forged customer list can survive even basic due diligence if lenders don’t have independent data connections.
Stale monitoring. Credit teams might review borrower data quarterly or semiannually — long after the story has changed.

These cases have magnified that in a system where data is delayed, deceit is probable.

The Case for Continuous Verification

Private credit doesn’t need to become public to become safer. It needs to become connected.

The next evolution of risk management will come from continuous verification — a framework where lenders are no longer dependent on snapshots, but can monitor performance in real time.

That means:

Direct data integrations with accounting, banking, and payment processing systems, ensuring that the numbers lenders see are the numbers that actually move.
Automated anomaly detection that flags sudden changes in receivable aging, payment timing, or customer concentration.
Cross-market benchmarking that contextualizes performance, identifying when a borrower’s data drifts from peers in subtle but significant ways.

The question for private markets isn’t whether these tools will exist — they already do — but whether they will become the operating norm before the next wave of losses hit.

Data as a Discipline

Institutional investors are beginning to view data integrity as a governance issue, not a technical one. LPs increasingly ask: How do you validate what you underwrite? How do you monitor what you fund?

Funds that can demonstrate live data access and transparent monitoring workflows will not only manage risk better — they’ll attract capital faster.

The alpha will belong to those who build data and technology infrastructure, not just portfolios.

The Leadership Imperative

For private credit managers, the takeaway is not to retreat from risk — but to redefine the perimeter of control.

Connectivity changes the conversation:

It reframes underwriting from a document review to a data relationship.
It replaces static audits with continuous confidence.
And it shifts risk management from hindsight to real-time insight.

About Hum Capital

At Hum Capital, we believe that the next frontier of private markets is connectivity. Our Intelligent Marketplace connects companies’ financial systems directly with investors, providing verified, real-time performance data that powers smarter underwriting and ongoing monitoring.

We don’t replace human judgment — we augment it with data integrity. That’s how we help private credit funds prevent fraud, detect early defaults, and build the transparency their LPs now expect.

Learn how Hum is setting a new standard for private credit transparency here.