The MoneyPot Live: Architecting a Better Borrowing Experience

Pagaya helps banks say yes without holding the risk

Banks lose the moment of truth when they decline a customer who asks for a loan, and the need, often along with the wider relationship, goes elsewhere. Pagaya sits behind the bank's application, takes the declines and returns approvals it funds and sells to institutional investors, so the bank keeps the customer while Pagaya carries the risk. It reviews millions of applications a year and approves about 1%, finding borrowers that banks' risk frameworks cannot reach.

Takeaways

• Pagaya lets banks approve declines without the risk. A bank that decides to decline sends the application to Pagaya, which widens the criteria and returns an approval. The bank handles disclosures and services the loan, then Pagaya buys it and places it with more than 150 institutional investors.
• Fintechs filled a gap banks left open. In the first quarter of 2026, 40% of personal loans were underwritten by fintechs, against 2013 when 40% were underwritten by banks. O'Neil says fintechs met an unmet need rather than creating a market, and saying yes keeps deposit and investment relationships.
• Banks cannot easily underwrite deeper alone. Risk appetite frameworks set target loss rates and FICO floors, so going below 620 or 640 requires the independent risk organization to accept higher losses. Building enough volume to attract investor appetite would take years and major organizational change.
• Pagaya does not decide on FICO alone. The company reviews millions of applications a year and approves about 1%, excluding no one at 640 or 620. It reads alternative data and cues from TransUnion, and the resulting volume brings partners stability and predictability.
• Declined customers often carry more value. Consumers Pagaya approves after a bank declines skew younger and more digitally active, are likelier to self-serve and hold higher balances than the customers the bank would have approved. O'Neil says that segment is in many cases more valuable.
• Second-look programs break the customer relationship. They hand a declined consumer to a different lender, sometimes requiring a fresh application with unfamiliar branding and servicing. Pagaya runs inside the bank's own application in real time, so the consumer believes the bank approved and services the loan.
• Pagaya holds itself to bank standards. It is not a bank, but its partner onboarding covers fair lending and model risk management, and it opens its credit decision drivers to third-party risk review.

What bank leaders should do

• Look at how much loan balance customers hold elsewhere. Most banks will find a significant share sits with other lenders, which is demand they are not meeting.