Pagaya streamlines underwriting, counteroffers
Fintech drives up to 50% improved conversion rates for lenders
AI-based financier Pagaya Technologies is investing in capabilities for faster auto loan funding and counteroffers to increase conversion rates for lenders.
Pagaya is expanding its use of its Fast Pass offering, which allows consumers who meet certain criteria to bypass some documentation and stipulation information during the underwriting process, Ralph Leung, chief operating officer and chief commercial officer, told Auto Finance News, a sister publication to Bank Automation News.
Pagaya purchases loans originated under its underwriting criteria from lenders and securitizes the loans to fund further originations. The company’s underwriting model uses AI and consumer data from lenders to identify borrowers who can submit less information to be approved for a loan, Leung said, noting income and pay stub data as examples of documents that may not be required.
“We can’t offer that [Fast Pass] type of experience to everybody, because it is still part of our credit underwriting process,” he said. “But with enough data from different [lender] partners and understanding how the profiles of certain borrowers can perform, we have been able to say [for those borrowers], we can bypass some of the typical stipulations.”
Cutting out some requirements streamlines the lending process, Leung said, and leads to:
- an improved user experience; and
- increased volume for Pagaya.
Identifying the best offer
The fintech is also expanding its Best Offer product, which allows Pagaya to submit a counteroffer alongside a lender’s in real time, Leung said. Pagaya’s offers are still presented to the consumer as from the lender, Pagaya President Sanjiv Das previously told AFN.
For example, Pagaya might be able to offer a larger loan or more favorable terms, Leung said.
“Then it’s up to the financing partner to [decide] which to present to the dealer,” he said. “More often than not, from the data that we’ve seen, those types of offers — where it better matches what the borrower is asking for — end up getting accepted. It’s not so much which is the cheapest rate.”
Tapping the data
Pagaya taps consumer behavior data to detect patterns in the types of loan structures and terms the borrowers are likely to accept, Leung said, noting that offering another option to consumers often leads to improved conversion rates for the lenders.
Based on a lender’s goals, size, risk appetite and capital or balance sheet needs, Pagaya raises conversion rates by between 5% and 50%, a company spokesperson told AFN.
Expanding lender and dealer adoption of Fast Pass and Best Offer programs allows Pagaya to grow while maintaining its risk appetite, Leung said. Pagaya is rolling the programs out to more of the lenders it works with and dealers within the lenders’ networks, he said, without providing further details.
“When you think about growth for Pagaya, it’s about these types of products that we have already put into market and starting to work with more dealers to offer these special products,” he said.
“If we’re not growing by opening the credit box, how else would you grow? You grow through product innovation.” — Ralph Leung, Pagaya
“This is where growth is going to come from. If we’re not growing by opening the credit box, how else would you grow? You grow through product innovation.”
Planned growth
The company went into 2025 planning to grow its base of lenders and deepen its existing relationships.
Lenders that have signed onto Pagaya’s platform include:
- Automotive Credit Corp.;
- Ally Financial;
- Consumer Portfolio Services;
- Foursight Capital;
- Stellantis Financial Services; and
Pagaya’s auto volume surpassed an annualized run rate of $1.1 billion in the first quarter, down 7% year over year but up 50% quarter over quarter, according to the company’s Q1 letter to shareholders published May 7.
The fintech also issued its first AAA-rated auto securitization on June 12, a $300 million subprime deal. The transaction comes as the company eyes growth driven by the lenders in its network, Leung said.
Editor’s note: This article first appeared on Auto Finance News, a sister publication to Bank Automation News.
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