Don't See Tricolor As A Widespread Phenomenon: Pagaya CEO

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00:00Just give us a sense, first of all, what kind of loans you do extend to which kinds of consumers

00:05and the average amount that they borrow. So thank you very much, Carlos, for having me today.

00:11In high level, before we go there, Pagaya is a generated AI type of a network that is connecting

00:17to lenders and basically helping them to approve more customers when they are coming through their

00:22way with the power of AI. And when you think about that, a few of our customers could be like the

00:28SOFAs, the Clarnas, U.S. Bank, and many of the leading financial lenders in the United States.

00:35Now, to your question, the place where we are focusing the most is the mid-fairway of the American people.

00:42So think about people with an income of $110,000 that are looking to get a $10,000, $20,000 loan for

00:49education or for refining their credit card. So this is really where we are focusing and helping these

00:56lenders to get more customers that could they actually provide them the credit and to be able

01:02to be effective in their marketing and their spending to bring them in.

01:07And what are you seeing in terms of demand for borrowing right now?

01:10So the demand to borrowing is actually strong. If you think about it, we think about it from an

01:16application perspective. So the Pagaya network has actually increased 32 percent year over year

01:22in the application volume. We are talking about an application of over $250, $60 billion of application

01:29we see every quarter. And this is a meaningful growth compared to last year. And obviously that

01:36led to the result that we have seen today because on the one hand side, we have stayed very prudent

01:41on who you are approving and how the credit should perform because this is the most important piece

01:47when you're running a lending business. But in the same time, there is a tremendous amount of growth.

01:52And that led us to increase the guidance for this quarter for the third time already for the year,

01:59shooting for much higher than what we thought would be at the start of the year.

02:02Of course, when you talk about credit, we have to talk about what's been going on over the past month,

02:06which is the credit market was rocked by some blowups, right? You had First Brands,

02:11Tricolore, Primaland, among others, you know, kind of auto-related bankruptcies. And to paraphrase Jamie

02:18Diamond of JPMorgan Chase, you know, if there's one cockroach, there might be other cockroaches as well.

02:24Given all of that, how much does that match what you're seeing? Do you see reason to be worried about

02:29more cockroaches?

02:31So I think from that perspective as a CEO, obviously, my job is to make sure these issues are not going to come to Pagaya.

02:37We were very lucky and with the very good discipline that we have. We didn't have any exposure to

02:42Tricolore or any other of the other names that you have mentioned, which is a great place to be in.

02:47And all of that is thanks to a very diligent due diligence and ability to understand what is really

02:51behind the hood of these different lenders and what's the asset that they are generating and where

02:56the people they are going. So there is a lot of knowledge and technology that goes into that,

03:01the ability of doing it right.

03:03But in general, I do not think it's a wide phenomena happening across.

03:08I can react mainly to the asset-backed world, and I think it's rather, rather tight.

03:15And we hope to see less and less of that in the future.

03:18And I think it was a good call out for the investor community and to everyone to know there is a

03:23difference between the good and the bad. And you should actually do your homework to make sure these

03:27things are not going to happen in the future many more times.

03:30Right. It's a reminder that you have to go back and do the basics.

03:33We talked about how Pagaya is an AI-powered consumer lender.

03:36How are you leveraging AI to expand access to consumer credit?

03:40And in turn, do you foresee this technology driving issuance volume in the consumer asset-backed

03:45security space in the future?

03:47So when you think about the power of AI, you really think about it as a technology tool that's

03:53seen behind the hood of the FICO. So a FICO could tell a very limited story. And someone with a FICO of

03:59660 or 680, part of them are very good borrowers, part of them are a little bit less. So with a very

04:05strong vast data network that we have, that we empowered through the 31 different lenders that exist

04:10on our network, we are actually pursuing through the best of the best from these type of bowels that

04:17might have been not getting the credit they deserve in different places. So the power of AI is actually

04:25to bring these consumers the ability to have the borrowing capacity that they need and to live a better

04:31life, which is at the end of the day what all of us are trying to do. And you need to use these AI technologies

04:37that are now are becoming more and more relevant in the a little bit more softer regulatory regime

04:44or more acceptance that these type of solutions should drive a better quality life for consumers

04:52and better way for big lenders to serve their customers in the right way they should.

04:57We talked about how you're AI powered. Is that spending on AI a one-time thing or are you continuously

05:02upgrading? Because I'm curious how your spending on AI has evolved over time.

05:06So technology is an ever evolution thing and you need to continue to invest. We have been very prudent

05:12on that because we have reached to an inflection point where you can think about the operational

05:17leverage of Pagaya to kick. We are doing today above $10 billion of loans in the same capacity and

05:23infrastructure that we had just like doing $6 or $7 billion. And if you ask us, we can actually reach

05:30to the $14, $15 and $20 billion with more or less the same infrastructure, but you need to do it right.

05:36And you need to do it where the spending matters. And that is the big lesson, I think, for all of us

05:41from the 21 and the different years of hype that even in a big investment periods, you need to know

05:48where are the areas of investment that could actually bring the outcome at the end.

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