Exclusive: Citizens to resume unsecured personal lending
- Key insights: Citizens is reentering the unsecured personal loan market through a partnership with Pagaya Technologies.
- What’s at stake: The launch comes as banks look for ways to expand lending with artificial intelligence.
- Forward look: Citizens will begin rolling the lending product out with a targeted marketing program on its app, with marketing emails to follow in early November.
Citizens is getting back into unsecured personal lending.
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The Providence, Rhode Island-based regional bank is slowly rolling out direct-to-consumer unsecured personal loans in its app through a partnership with Pagaya Technologies.
The launch comes as Citizens Bank doubles down on its relationship-based strategy and as more banks look to expand their credit box with artificial intelligence.
“For both card and personal loans, our approach has been this relationship-based strategy — making sure we have solutions to meet our customers’ needs,” Courtney Mitchell, Citizens head of credit card and unsecured personal lending, told American Banker. “When we look at our customers’ needs, [personal loans] was one product that we have not been able to offer our customers, and we know there’s the demand from both seeing what our customers have elsewhere, and then also just hearing directly from our customers asking for it.”
Pagaya’s AI-powered underwriting technology integrates with lenders’ loan origination systems to help them approve more loans. Lenders pay Pagaya to use its technology, and Pagaya also sells the loans it originates on the securitization market, allowing the lenders to keep those loans off their balance sheet. The company also is active in auto lending and point-of-sale lending. SoFi and U.S. Bank use its technology to underwrite personal loans, and Ally Financial uses its technology for auto lending, to name a few.
Citizens will originate and service the loans to maintain the customer relationship, and keep some of the loans on its balance sheet. “We’re going to continue to evaluate what that mix is, but there will be a mix of [on- and off-balance sheet lending], Mitchell said.
Personal loans are Pagaya’s largest origination pipeline and securitization shelf, according to Sanjiv Das, Pagaya’s co-founder and president.
“It is our estimate that we currently have about two and a half percent market share in personal loans,” Das told American Banker.
The tie up is an expansion of an existing relationship the two companies already had in the capital markets: Citizens is a frequent underwriter in Pagaya’s ABS deals.
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“They have even participated in our most recent ABS transactions, and so they know that the quality of what we produce is actually pretty high,” Das said.
Citizens will begin rolling the lending product out with a targeted marketing program on its app, with marketing emails to follow in early November, Mitchell said.
Regional banks are expected to
“Medium term, the key issue is implications for the economy and markets from high inflation and higher rates. Low income consumers have been squeezed for a while – key is when the middle income group starts to crack,” JPMorgan analysts said in a research note.
