00:00:06 · Oliver Smith, Terry O'Neil
[00:00:06] S0: Welcome to the MoneyPot, the Money20/20 podcast where we get under the skin of the people, ideas, and innovations reshaping the future of money. My name's Oliver Smith, I'm the head of content for Money20/20 Europe. And we're recording this episode live from Money20/20 USA in Las Vegas. Now, when a customer asks their bank for a loan and gets turned down, that has traditionally been the end of the conversation. But AI-led lending is giving banks new ways to reassess customers that they might once have turned down. And it turns out that there's much more to the technology. It's also about risk, funding, and the relationship with the customer. Now to explore all of that and more, I'm joined by Terry O'Neil, the Chief Commercial Officer at Pagaya. Terry joined Pagaya this year after more than two decades at Citi, where he most recently led embedded payments and strategic partnerships. Terry, it's great to have you here today. [00:01:04] S1: Great to be here, Oliver. Thank you. Awesome. [00:01:06] S0: So, Terry, first of all, you spent more than two decades at Citi and have now moved from banking to the technology side. What brought you to Pagaya? What interested you about that opportunity? And what do you see in the network that Pagaya has built between banks and capital markets? Tell us a bit about that.
00:01:26 · Terry O'Neil, S2
[00:01:26] S1: Yeah, absolutely. So, as you said, I spent uh two decades at Citi. Most recently, I was responsible for embedded payments and fintech partnerships. So that gave me an opportunity to look at how we improve our processes, how Citi could improve customer experience. I actually happened to come across Pagaya when I was working at Citi and had an opportunity to spend quite a bit of time. And the reason being was I was looking for ways to approve more customers. A lot of what we were experiencing in point of sale lending was how we could strategically and responsibly open up our aperture, how we could approve more customers responsibly without taking on additional risk. So Pagaya was one of the partners that I was paying quite a bit of attention to, became very attracted to their capabilities and how they were building their network. And more importantly, how Pagaya enabled the bank partner to keep the customer within their ecosystem. So very different than traditional second look programs where the customer leaves the bank's ecosystem. With Pagaya as a banker, I what I loved about it was that I was able to keep that relationship with the consumer and continue to build that relationship with the consumer and ultimately over time build customer lifetime value. [00:02:39] S2: Amazing.
00:02:39 · S2, Oliver Smith, Terry O'Neil, S3
[00:02:39] S2: Amazing. [00:02:39] S0: Now, I I was lucky enough to meet your CEO, Sanjeev, uh at Money20/20 last year, actually. Um so I know a bit about the company, but there may be people in the audience who don't know as much. So help me set the scene. When a bank turns down a customer for a loan, that customer may simply go to another lender. Now, why is this such a difficult problem for banks to solve? Uh how can they expand access without loosening their risk standards, uh, rebuilding their core systems? Tell us a bit about that problem that Pagaya is solving and how it's solving it. [00:03:09] S1: Yeah, I could speak to it from both sides of the equation, both as a former banker and as a new Pagaya employee. It's a moment of truth. When a customer comes to their primary bank for a loan, they have a very specific need. What we've seen is in many cases it's debt consolidation, or they have an unexpected emergency, or they're trying to make improvements to their home. Um, so they have a need for that loan and they're looking for traditionally their primary bank to solve it. Yeah. If the primary bank can't meet that need, they will look elsewhere. Um, and what we've seen over time is a lot of that uh that those loans get underwritten by fintechs. Um, just this year, if you look at Q1 2026, 40% of personal loans are underwritten by fintechs. [00:03:51] S3: Wow.
00:03:51 · S3, Terry O'Neil, Oliver Smith
[00:03:51] S3: Wow. [00:03:51] S1: Go back to 2013, yeah, 40% of loans were underwritten by banks. So fintechs really didn't create the market, they were meeting an unmet need. And I think why it's so important for our banking partners to meet a consumer's need when they're asking for it, is because of that moment of truth. You have an opportunity to build trust and you have an opportunity to build that relationship. You met them where they needed you to meet them at a moment in time where they had that need. And what we've seen is particularly if you're their primary banking relationship, you have an opportunity to retain all of their other relationships, whether it be a checking account or a savings account or an investment account, but you also have the opportunity to build on that relationship, right? The personal loan that the consumer needed can actually become an entry point to continue expanding that relationship with the consumer. [00:04:40] S0: Super interesting. Because yeah, as we've seen, like fintechs have used their lending as the kind of sharp edge to win customers and then build that relationship. So this is about giving banks the opportunity to sort of fight back against that. Where does part where does Pagaya fit into the bank's existing lending journey? Where do you guys kind of slot into the solution?
00:04:40 · Oliver Smith, Terry O'Neil, S3
[00:04:40] S0: Super interesting. Because yeah, as we've seen, like fintechs have used their lending as the kind of sharp edge to win customers and then build that relationship. So this is about giving banks the opportunity to sort of fight back against that. Where does part where does Pagaya fit into the bank's existing lending journey? Where do you guys kind of slot into the solution? [00:04:59] S1: Yeah, I think what's beautiful about it is we're behind the scenes. Okay. We're the intelligence inside the bank's underwriting strategies. So we embed directly via API conductivity into the bank's normal onboarding process, their application system. What ends up happening is when a bank is going to decline a consumer, they pass that decline to us. We help expand the aperture a little bit. If we're going to approve that consumer, we send an approval back. [00:05:23] S3: Okay.
00:05:23 · S3, Terry O'Neil
[00:05:23] S3: Okay. [00:05:24] S1: The consumer gets underwritten and approved within the bank's own application process. All of the loan docs, the truth and lending docs, are all handled by the bank. The loan is booked by the bank. And then we buy that from the from the bank and move it to our institutional investors. So from a consumer's perspective, it's completely transparent. Yeah. The consumer believes that they have been approved and underwritten by the bank. By the bank. Yeah. The customer's relationship stays with the bank and the bank continues to service that loan. So what's really, I think, unique about it versus other forward flow strategies or decline monetization strategies is that from the consumer's perspective, the bank approved the loan and the bank is continuing to service the loan. From the bank's perspective, in addition to not holding the risk on their balance sheet, they can continue to integrate and engage with that customer. They continue to cross-sell that customer. They can continue to build out that customer's lifetime value with the bank because it's a completely seamless transaction for the customer.