In an interview, Pagaya’s CEO explained how the company uses AI to approve borrowers by analyzing consumer behavior and payment history, moving beyond traditional credit scores to ensure fair lending practices. Despite recent market fluctuations, Pagaya’s technology has successfully helped over 2 million customers secure loans, indicating a positive trend in consumer credit health.
In a recent interview, the co-founder and CEO of Pagaya discussed how the company leverages artificial intelligence (AI) to assist lenders in approving borrowers beyond traditional credit scores. Despite a 7% drop in shares following an earnings report that beat expectations, the CEO emphasized the positive impact of their technology on lending practices. Pagaya collaborates with major banks, such as Ally Bank and U.S. Bank, to extend loans to over 2 million customers, totaling approximately $21 billion.
The CEO explained that Pagaya’s AI technology addresses regulatory concerns by ensuring that lending decisions are made without discrimination based on race, gender, or age. Instead of relying solely on FICO scores, which provide a limited view of a borrower’s creditworthiness, Pagaya’s AI analyzes consumer behavior and payment history to assess the likelihood of repayment. This approach allows for a more comprehensive evaluation of borrowers, considering factors that traditional credit assessments might overlook.
When asked about the specific data points used in their AI models, the CEO highlighted the importance of responsible payment behavior, such as timely credit card and auto loan payments. While the AI does not directly access rental payment histories, it focuses on credit-related data to predict repayment capabilities more accurately. This innovative use of data has proven effective in helping consumers secure the loans they need.
The conversation also touched on broader economic trends, particularly concerns expressed by CEOs regarding consumer spending. The CEO of Pagaya noted that, contrary to these concerns, their data indicates that consumers are managing to pay back their loans effectively. This positive trend is supported by insights from the various banks Pagaya partners with, suggesting that consumer credit health may be better than perceived.
Looking ahead, the CEO mentioned the potential for interest rate reductions later in the year, which could further enhance consumers’ ability to repay loans. As interest rates decrease, borrowers may find it easier to manage their debts, leading to a more favorable economic outlook. Overall, Pagaya’s AI-driven approach to lending not only helps banks make informed decisions but also supports consumers in accessing financial resources responsibly.