00:16:33 · S3, Terry O'Neil, Oliver Smith
[00:16:33] S3: Yeah. [00:16:33] S1: Where, and then Pagaya, as you said, is managing the loss and the risk associated with the asset. So I think it becomes a really interesting value proposition for our banking partners. They are able to build on the lifetime value of the customer, which the value of that really should not be underestimated if you meet that customer at the point of time. But you're also able to bring fee income into your organization because of how we structure the relationship. [00:16:59] S0: Yeah. I think holding on to those customers, as we've said, at that kind of emotional moment and being able to say yes is priceless. You know, it's so valuable. Um, so beyond approvals, what should a bank measure to know that the relationship is becoming more valuable? Like how do they know that customers getting those approvals are increasing the value for their business? [00:17:23] S1: Yeah, absolutely. So approvals is, I think, the first piece of it, making sure that we're finding consumers that can be underwritten that would otherwise be missed, that there's value there. I think again, we've spoken a lot about customer lifetime value. [00:17:37] S3: Yeah.
00:17:37 · S3, Terry O'Neil, Oliver Smith, S5
[00:17:37] S3: Yeah. [00:17:37] S1: Making sure that you have a very specific strategy in place to measure the value of that customer over time, that you have very specific cross-cell strategies in place for that, for that consumer. And then I think over time you can look at what the quality of those assets are, right? You can we can prove our model out because you, as the servicer, the bank as the servicer also sees how those assets are performing. [00:18:01] S3: Yeah. [00:18:01] S1: Um, so they get a sense of what it takes to serve those customers. They get a sense of what the payment trends for those consumers look like. But I think for me as a former banker, what I would have been most excited about was keeping the relationship and being able to build and expand that relationship over time. [00:18:17] S0: Yeah. Yeah. Because losing the customer at that point, it's a it's sort of yes, it's a small loss at the time. It's just a loan. But as we've said, that that eventually leads to more significant losses. So from the customer's point of view, how how does the experience stay entirely within the bank? And I know we're hammering this point home, but I think it's so important because it's almost hard to believe that the customer wouldn't know, wouldn't realize that both the loan, the application, through to getting the money and the servicing is all staying within the bank relationship. [00:18:50] S5: Yeah.
00:18:50 · S5, Terry O'Neil, S3
[00:18:50] S5: Yeah. [00:18:50] S1: Absolutely. Well, you know, as I was saying earlier, it's a completely seamless integration with our partner's application UX. So it's all happening behind the scenes, right? Very real time in milliseconds. If our partner is going to decline a consumer, they pass that to us. Yeah. Um, and we'll instantaneously deliver a decision that gets delivered into our partner's UX. [00:19:13] S3: Yeah. [00:19:14] S1: Um, so from a consumer's perspective, they don't, they don't know that they've left that UX. [00:19:18] S3: Yeah. [00:19:19] S1: So I was also saying is because we sit behind our partners, the consumer sees all of the disclosures and loan docs from the partner. And so all the branded, it's all it's all the partner's branding and all the servicing is the partner's branding. I think it's important to point out that that's very different than most second look programs. Yeah. A lot of times in a second look program, if a consumer is getting declined, they're getting passed to a different issuer, a different lender. Sometimes they need to reapply, sometimes they're hitting a speed bump. Um, and at the very least, they're seeing different branding and seeing different servicing. And that can be a very jarring experience for the consumer. Whereas if you look at a much more seamless integrated where the lender stays end-to-end as the brand that's facing that consumer, that's much more powerful and a much better experience for the customer.
00:19:19 · Terry O'Neil, Oliver Smith
[00:19:19] S1: So I was also saying is because we sit behind our partners, the consumer sees all of the disclosures and loan docs from the partner. And so all the branded, it's all it's all the partner's branding and all the servicing is the partner's branding. I think it's important to point out that that's very different than most second look programs. Yeah. A lot of times in a second look program, if a consumer is getting declined, they're getting passed to a different issuer, a different lender. Sometimes they need to reapply, sometimes they're hitting a speed bump. Um, and at the very least, they're seeing different branding and seeing different servicing. And that can be a very jarring experience for the consumer. Whereas if you look at a much more seamless integrated where the lender stays end-to-end as the brand that's facing that consumer, that's much more powerful and a much better experience for the customer. [00:20:08] S0: Terry, we've only got a few minutes left. I want to make sure to get to these last few questions. Firstly, AI. Um, AI-powered underwriting raises questions around transparency and oversight. Um, tell us a bit, what does what does bank grade AI and machine learning look in practice? What's Pagaya doing here? Um, and how do you satisfy your bank clients? They obviously have risk compliance, regulatory expectations. How do you satisfy all of that?
00:20:08 · Oliver Smith, Terry O'Neil
[00:20:08] S0: Terry, we've only got a few minutes left. I want to make sure to get to these last few questions. Firstly, AI. Um, AI-powered underwriting raises questions around transparency and oversight. Um, tell us a bit, what does what does bank grade AI and machine learning look in practice? What's Pagaya doing here? Um, and how do you satisfy your bank clients? They obviously have risk compliance, regulatory expectations. How do you satisfy all of that? [00:20:36] S1: Yeah, absolutely. I think it comes down to a couple of things. Um, first and foremost, even though Pagaya is not a bank, we hold ourselves to the same standards that a bank would be held to. Um, secondly, you mentioned transparency. We are very, we have full transparency with our banking partners. Um, and there's an onboarding process that we typically move through with our partners. Um, the bankers in the room will recognize fair lending, model risk management, and third-party risk management, where they have a deep view into how our models work, our credit response drivers and decisions that we're making. So that's how we give them comfort that we're able to operate at the bank level, right? And that we're fully compliant. So our compliance teams at Pagaya hold our hold them hold ourselves to the same standard that banks are held to from a regulatory perspective.
00:20:36 · Terry O'Neil, Oliver Smith
[00:20:36] S1: Yeah, absolutely. I think it comes down to a couple of things. Um, first and foremost, even though Pagaya is not a bank, we hold ourselves to the same standards that a bank would be held to. Um, secondly, you mentioned transparency. We are very, we have full transparency with our banking partners. Um, and there's an onboarding process that we typically move through with our partners. Um, the bankers in the room will recognize fair lending, model risk management, and third-party risk management, where they have a deep view into how our models work, our credit response drivers and decisions that we're making. So that's how we give them comfort that we're able to operate at the bank level, right? And that we're fully compliant. So our compliance teams at Pagaya hold our hold them hold ourselves to the same standard that banks are held to from a regulatory perspective. [00:21:30] S0: So you're yeah, you're matching that level so that they can have confidence in in how you're acting. Um, Terry, my last question. Um, what is the single most actionable thing that you would tell a bank leader who wants to future proof their lending stack whilst still expanding access uh responsibly?