The bond issuance is being handled by JP Morgan Chase and Atlas, a division of Apollo Global Management. Historically, Pagaya has focused on securitizing unsecured personal and auto loans, issuing approximately USD 5 billion in bonds over the past year. However, this move into BNPL signals an attempt to diversify its asset portfolio and tap into a rapidly growing segment of the consumer credit market.
BNPL Gains Popularity Among Limited Borrowers
Recent findings indicate that BNPL is increasingly favored by individuals with limited access to traditional credit sources. About 40% of these borrowers have availed BNPL financing, in contrast to just 27% of those with super-prime credit scores. This group is also more inclined to explore alternative financing options like payday loans and credit-builder products.
Though such alternatives are generally more accessible with lower rejection rates, they often come with high interest rates and fees. Moreover, some providers of these services do not report repayment data to major credit bureaus, which limits their utility in helping borrowers establish a credit history.
During the recent holiday season, BNPL accounted for roughly 8% of all retail purchases, reflecting its growing significance in consumer finance. Pagaya’s entry into this field places it in direct competition with Affirm, another key player in the sector.
Nevertheless, while Affirm typically caters to consumers with strong credit profiles, Pagaya targets borrowers who fall just short of Klarna’s approval criteria.
