00:06:24 · Oliver Smith, Terry O'Neil, S3
[00:06:24] S0: So if I said Pagaya to the borrower, the consumer, they would have no, they would, they would believe the relationship is still there with the bank. That's right. Amazing. Um, okay, so debt consolidation drives so much demand for personal loans. That's what a lot of people are looking to do. Why is being able to say yes at that particular moment so important for banks trying to deepen their primary customer relationships, especially with debt consolidation? Tell us why that's so important. [00:06:50] S1: I think it comes down to a couple of things. If, you know, if if our banking partners take a look at what loans consumers have off them, balances that they have with under other institutions, they're going to see that there's a significant amount of loan balances that are not held by their primary bank. [00:07:07] S3: Yeah. [00:07:07] S1: Um, so first and foremost, the consumer has a stated need to borrow. I think as it relates to debt c consolidation, as we were talking about earlier, there's a moment in time need where the consumer is making a decision to improve their finances, to get to one lower monthly payment or a better cost of credit for the consumer so that they can better manage their debt. [00:07:28] S3: Yeah.
00:07:28 · S3, Terry O'Neil, Oliver Smith
[00:07:28] S3: Yeah. [00:07:29] S1: If you're the institution or the or the bank that can solve that need for them, you provide a very real and tangible service that they need at that point in time. Yeah. And because you do that, you build trust with the consumer and then build the relationship from there. A lot of times it's a catalyst. If a consumer is thinking about debt consolidation, thinking about managing their monthly expenditures or the cost of their credit, they're often thinking about how do they get all of their other finances in order or in a better position or they might be planning for something. If you're the bank that helps them do that beyond the checking account, beyond the savings account, beyond the credit account, you can think about starting to expand that relationship into maybe a mortgage, into maybe investments. So it really helps you bring that whole relationship together and build the relationship with the consumer. [00:08:17] S0: Yeah. It's quite an emotional sort of moment, I think, for consumers going through that. And for their traditional bank to say no at that moment is kind of like heartbreaking. And that's why I think fintechs have had that advantage in the past because they've been the ones able to say yes in that moment. Yes. But this is now allowing banks to say yes. Um, we you've you've talked about the opportunity uh in the applications that traditionally bank scorecards would decline, the kind of reject pile. How does Pagaya identify credit worthy borrowers within that group rather than simply taking on more risk?
00:08:17 · Oliver Smith, Terry O'Neil
[00:08:17] S0: Yeah. It's quite an emotional sort of moment, I think, for consumers going through that. And for their traditional bank to say no at that moment is kind of like heartbreaking. And that's why I think fintechs have had that advantage in the past because they've been the ones able to say yes in that moment. Yes. But this is now allowing banks to say yes. Um, we you've you've talked about the opportunity uh in the applications that traditionally bank scorecards would decline, the kind of reject pile. How does Pagaya identify credit worthy borrowers within that group rather than simply taking on more risk? [00:08:51] S1: Absolutely. So we're able to expand the aperture. We're able to look at other data to uh to assess the consumer's credit worthiness. So it's not a binary decision. It's not a decision based on a FICO score. It's not we won't take anybody under 640 or anybody under 620. We're looking at additional cues so we can find those consumers across the credit spectrum that should be underwritten and could be underwritten. And I say that we're still very prudent, right? Even though we look at uh millions of applications a year, we uh we approve about 1% of them. And we do that very intentionally to ensure that we focus on quality over quantity. Yeah. But what really enables us to open the aperture are the additional data sources that we can look at to get a better view of the consumer's creditworthiness. [00:09:40] S0: Can you tell me anything about those data sources? Is this alternative data? What do we what do we look at?
00:09:40 · Oliver Smith, Terry O'Neil, S3
[00:09:40] S0: Can you tell me anything about those data sources? Is this alternative data? What do we what do we look at? [00:09:44] S1: There's some alternate alternative data in there. We're using cues from TransUnion and other other um sources that where we can look at the total picture of the consumer. It's part of what's proprietary about our business and what makes us very unique in terms of how we can help open the aperture and bring in those consumers that would otherwise fall through the cracks or not be underwritten. [00:10:04] S3: Yeah, interesting. [00:10:05] S0: Um so uh Pagaya, I think, cites about four trillion dollars in lifetime application data, um, which is a a vast, vast number. What does that scale add to the does that does that huge database help you to make more better decisions in the future? Tell us a bit about that.
00:10:05 · Oliver Smith, Terry O'Neil
[00:10:05] S0: Um so uh Pagaya, I think, cites about four trillion dollars in lifetime application data, um, which is a a vast, vast number. What does that scale add to the does that does that huge database help you to make more better decisions in the future? Tell us a bit about that. [00:10:24] S1: Yeah, every time we look at a consumer, every time we underwrite a consumer, we're able to build additional pieces of information that help us connect better to the customer and make better credit decisions. It helped it also helps us with our partners build a competitive moat around their consumers, right? The more approvals that we can book, the more approvals that we can bring on responsibly helps us to bring more approvals through for our banking partners and even our fintech partners. I think the other piece that it does when you think about that volume, it helps us bring stability to the equation. It helps us bring more predictability to the flow that we're gonna come through. So aggregating those balances gives us more ability to open up capital so that we can fund those loans and move them from our partner's balance sheet into institutional investors. It's how we sort of aggregate everything together to bring, you know, the network effect of what Pagaya brings, right? Not just the decision to approve a customer, but also how we move that loan off of our partner's books into capital markets. Um, that scale helps us to do that very efficiently.
00:10:24 · Terry O'Neil, Oliver Smith
[00:10:24] S1: Yeah, every time we look at a consumer, every time we underwrite a consumer, we're able to build additional pieces of information that help us connect better to the customer and make better credit decisions. It helped it also helps us with our partners build a competitive moat around their consumers, right? The more approvals that we can book, the more approvals that we can bring on responsibly helps us to bring more approvals through for our banking partners and even our fintech partners. I think the other piece that it does when you think about that volume, it helps us bring stability to the equation. It helps us bring more predictability to the flow that we're gonna come through. So aggregating those balances gives us more ability to open up capital so that we can fund those loans and move them from our partner's balance sheet into institutional investors. It's how we sort of aggregate everything together to bring, you know, the network effect of what Pagaya brings, right? Not just the decision to approve a customer, but also how we move that loan off of our partner's books into capital markets. Um, that scale helps us to do that very efficiently. [00:11:29] S0: And because you're working across all of those partners with different customer bases, geographic, your regional, like you get such a broad understanding of the market versus a bank that may have a slightly more narrow view on what they say yes and no to. [00:11:43] S1: Yeah. And I think the other thing that we see is the health of the consumer. [00:11:46] S0: Yeah.